Log in
Login
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesHot NewsMost Read NewsRecomm.Business LeadersCalendar 

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

share with twitter share with LinkedIn share with facebook
share via e-mail
0
02/20/2013 | 04:35pm CEST




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.'

share with twitter share with LinkedIn share with facebook
share via e-mail
0
React to this article
Latest news
Date Title
02:40p ORGANOCLICK : Notice of Annual General Meeting in OrganoClick AB (publ)
02:39p IEC ELECTRONICS CORP : Regulation FD Disclosure (form 8-K)
02:38p CANYON GOLD CORP. : Announces a Name Change
02:37p MARRIAGE LICENSES : May 26, 2016
02:37pDJPETROLEO BRASILEIRO PETROBRAS : Petrobras Reports Unit Shutdown at Texas Refinery
02:36p DISCLOSURE OF INTEREST/ CHANGES IN INTEREST OF SUBSTANTIAL SHAREHOLDER(S)/ UNITHOLDER(S) : : Change In Interest - Joseph Ang Choon Cheng
02:36p NORDEA BANK : Equity Research no 1, says Thomson Reuters
02:36p KINGSTON RESOURCES : Letter to Option Holders- Re Expiry KSNOA on 30 June 2016
02:36p LEOVEGAS PUBL : Announcement from LeoVegas AB annual general meeting
02:36p ISR CAPITAL : Clarification on Announcement Titled "Entry into of a Memorandum of Understanding"
Latest news
Advertisement
Latest Videos
USA - ROSNER
Positive macro picture for U.S. consumers - BNP Paribas
SINGAPORE - ROSGEN
U.S. dollar has further to rally - Citi
UK - SHAH
Fiscal consolidation may lead to rate upgrade for India - Shah
UK - PARSONS
QE makes the rich richer and the poor poorer - NAB
USA - AMOBI
Turner Broadcasting a bright spot for Time Warner - S&P Capital
SINGAPORE - ROSGEN
Good environment for equities now - Citi
UK - SHAH
Investors want to see India cut subsidies - Shah