Member access

4-Traders Homepage  >  News  >  Videos

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 

A BoE bombshell, sterling battered ... again - analyst

02/20/2013 | 10:35am US/Eastern
Recommend:
0




Sterling tumbles and the FTSE hits a 5-year high after BoE minutes stun UK markets - King votes for more QE and a rate cut is discussed. Robert Wood, UK economist at Berenberg Bank, believes further monetary stimulus is on the way.

SHOWS: LONDON, ENGLAND, UK (FEBRUARY 20, 2013) (REUTERS - ACCESS ALL)

1. BERENBERG BANK UK ECONOMIST, ROBERT WOOD, SAYING:

'Well the minutes today were obviously extremely dovish with 6-3 vote against more QE. Mervyn King and Paul Fisher joining David Miles in voting for more QE. To be honest, I would rule out a further interest rate cut but it does look like further monetary stimulus is on the way which will be supportive.
(QUESTION: So higher FTSE, probably higher stocks but the flip side of that, of course, is a lower Pound. The Pound has been battered today again. But you're still quite bearish on it.)
Yes, we are, yeah. I don't think the fall in Sterling is at all unwarranted actually, with monetary policy likely to remain very stimulative, with interest rates likely to remain low for - I mean, frankly, years, and the ECB looking a bit more hawkish, tail risks in the euro zone receding a bit then safe haven flows reversing weak monetary policy, I think - I think further falls in Sterling are likely.
(QUESTION: Against the Dollar back in 2009, if I'm not mistaken, fell down to what, 1.38?)
That's right.
(QUESTION: Is that a target?)
I'm not sure I'd call it a target. I mean I wouldn't think it would go that low but certainly lower from where it is here.
(QUESTION: Okay. And as such, the equities and the foreign exchanges. Now what about the bond market? It seems a little bit harder to call.)
Yeah, I think that's right because you've got the Bank of England essentially committing to keep interest rates low for the foreseeable future even if inflation runs above target. So no interest rate increases coming - I mean at least until 2015. We think 2016. But yet inflation, as I say, is likely to run above 2%, probably peak above 3% this year. So you've got forces pushing in both directions.
(QUESTION: All this central bank stimulus has obviously seen a sharp move lower in the Pound. That's not done much good for the UK economy, has it? I mean the trade balance is still pretty dire, there's no growth.)
I'd have to disagree with you there a bit. I think the fall in Sterling originally did do quite a lot to the trade balance, so it fell by more than half from before the crisis to mid-2011. That was until the euro zone crisis really kicked off in the summer towards the end of 2011 and then through the summer of 2012. Sterling appreciated, exports to the euro zone fell and I think that really harmed the trade balance. So further falls in Sterling should help. I mean let's keep it in perspective, the effect of the exchange rate is down not more than 5% over the past couple of months. Obviously a lot more against the Euro, but less against the Dollar. So I think it will help a bit but that's one reason why we think Sterling probably has further to go. The UK is running a current account deficit of 3.4% of GDP which clearly isn't sustainable in the long run.'

Recommend :
0
React to this article
Latest news "Videos"
Date Title
6h ago U.S. consumers favour prime location malls - Turner
9h ago Inverse relationship between crude prices and U.S. dollar strength - Bell
10h ago UK grocery market in turmoil with more negativity to come - McCaig
1d ago Markets should monitor Hong Kong protests - Canally
1d ago Alternative investments often outperform equities in weaker markets - Davis
1d ago Caution expected at upcoming Fed meet - Derrick
1d ago Bargains to be had in European equity markets - Elliott
1d ago HSBC September PMI shouldn't be leant upon - Colquhoun
2d ago Natural gas sought as cheap alternative to petrol - Kelley
2d ago Pimco will take new direction - Kinnel
Latest news "Videos"
Advertisement
Latest Videos
USA - TURNER
U.S. consumers favour prime location malls - Turner
UK - BELL
Inverse relationship between crude prices and U.S. dollar strength - Bell
UK - MCCAIG
UK grocery market in turmoil with more negativity to come - McCaig
USA - CANALLY
Markets should monitor Hong Kong protests - Canally
USA - DAVIS
Alternative investments often outperform equities in weaker markets - Davis
UK - DERRICK
Caution expected at upcoming Fed meet - Derrick
UK - ELLIOTT
Bargains to be had in European equity markets - Elliott
Dynamic quotes  
ON
| OFF