Sterling slips ahead of UK employment data, BoE minutes
02/20/2013 | 12:25pm CET
A big day for Sterling with Bank of England minutes and UK employment figures due. Tom Elliott, Global Strategist at JP Morgan Asset Management, explains why he expects further weakness for the UK currency, and why EU lawmakers should keep out of the bank bonus debate.
1. JP MORGAN ASSET MANAGEMENT GLOBAL STRATEGIST, TOM ELLIOTT, SAYING:
(QUESTION: It's been a pretty torrid year for Sterling- 16-month low in a trade weighted basis, not even George Soros would short it here.)
Yeah, and we're not really seeing it getting any better. We started the year thinking that Sterling would be the ugliest of the major currencies. The Yen has year-to-date exceeded that if that's the right term to use but we think there's further weakness for Sterling over the rest of the year. It's worth remembering that one of the drivers against Sterling is that investors are leaving safe haven currencies, so they're leaving the Swiss Franc to an extent they've been also leaving the Dollar and Sterling as well. Now, of those, Sterling has the weakest fundamental macroeconomic outlook so, it's fallen further.
(QUESTION: Okay. Okay. And talking of weak macroeconomic fundamentals, I want to move on to Spain and Italy, Spanish Prime Minister Mariano Rajoy gives his state of the union style address today to the Parliament and Italian elections on Sunday, yet you think both countries, the risks are overplayed?)
Yes, we actually- we're slightly long on those sovereign bond markets. We do think that there's more worry in them than is actually valid. It's worth noting I think in the case of Spain, tremendous progress has been made at the federal level in reining in spending. There is still a problem with the states, with the regions who are able to spend and then pass the bill on to central government. They still need to be reined in but yeah, we're still buyers of the Draghi put.
(QUESTION: Okay. I want to finish up on bankers' bonuses. Now yesterday, there were heated discussions in the EU Parliament. Talks were tense with lots of yelling apparently. The upshot is, talks will resume next week. So, I suppose for now at least, you and your mates in the city, your bonuses are safe?)
Yeah. I mean, you know, you could say I would say this, wouldn't I, coming from a bank but I think it's interesting you see lawmakers in the European Parliament taking on the role of regulators and one really has to ask, is this what they should be doing? And then there's a slightly even less charitable suspicion and that is there is a continued view in the minds of many contemporary Europeans that the crisis was caused through Anglo-Saxon capitalism, that it's bankers' rapacity that had caused this. (Well, it was, wasn't it? I mean, this was started by the subprime prices in the States?)
Oh no, no, the sub-fund crisis, sorry, but what these guys are really concerned is, of the euro zone debt crisis and the fact that those countries mounted up huge debt. It didn't really have much to do with my behaviour.'