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
4h ago Alibaba issues additional shares to raise IPO total to $25bln
4h ago China has a great opportunity to expand in the U.S.- Mark
6h ago Despite slide gold remains an attractive long term proposition- Mayo
8h ago French will push to postpone debt and deficit in German talks- Vosa
10h ago Fed interest rate hike is next big catalyst for markets- Gill
3d ago Alibaba will struggle in U.S. without major acquisition - Widger
3d ago Alibaba debuts on the New York Stock Exchange - Garnick
3d ago Moody's Brent forecast too low, says Daiwa's Kuenzel
3d ago Unity the key word for Europe after Scottish vote - McCaig
3d ago Scottish 'No' means Bank of England can move ahead with hike - Jakobsen
Latest news "Videos"
Advertisement
Latest Videos
USA - WALLACE
Alibaba issues additional shares to raise IPO total to $25bln
USA - MARK
China has a great opportunity to expand in the U.S.- Mark
UK - MAYO
Despite slide gold remains an attractive long term proposition- Mayo
UK - VOSA
French will push to postpone debt and deficit in German talks- Vosa
SINGAPORE - GILL
Fed interest rate hike is next big catalyst for markets- Gill
USA - WIDGER
Alibaba will struggle in U.S. without major acquisition - Widger
USA - GARNICK
Alibaba debuts on the New York Stock Exchange - Garnick
Dynamic quotes  
ON
| OFF