FX Global currency watch
might also encourage further flows into GBP from other middle-eastern entities, as the bargain-hunters part with cash to get a piece of the still quite vibrant UK economy.
Also to note is that we think GBP will now be bid especially vs. the Euro on Olympic & retail visitors to the UK this summer. Similarly from an inflow standpoint, tourism authorities are expecting large visitor numbers for the Queen’s
60th
The British Pound may be one of the more stable-to-higher currencies in the next quarter
firepower GDP/tax
caused in by such lower receipts, which have
been hit markedly by the vast banking losses that had been contributing
stellar
fashion to the economy in the recent past.
Not to say that positioning against a central bank is ever a preferred strateg y, the Swiss could turn on the printing presses to weaken the CHF which seems to be popular everywhere, but in FX things can change quickly and adept forex participants do have a habit of identifying opportunity and targeting vulnerable situations, and we think these topics are definitely worthy of
16 FX TRADER MAGAZINE April - June 2012
consideration in regards to the Yen and the Swiss Franc.
F outperforming
inally, while the USD may prevail generally against markets that have been (particularly
AUD, NZD, JPY), we think that the British Pound may be one of the more stable-to-higher currencies in the next quarter or so for many reasons :
Falling UK inflation should spur demand for gilts and there is a big governmental push through the tax system to attract funds/ investment into the UK, for example Abu Dhabi
investment
firms are reportedly in talks to buy 30% of RBS equity, which
(Diamond)
Jubilee celebrations, the move to extend retail hours for 8 weeks on Sundays should also provide underlying support by creating more demand for the Pound.
Currently the EUR/GBP rate is around 83.5 pence per Euro, we see scope for this to improve by around 10 percent to 75 pence per Euro with resistance on the topside at 85 and 86 pence per Euro.
Kevin Sollitt
For weekly updates visit Kevin’s blog here Follow Kevin Sollitt on Twitter here
Thanks to all our sources for respective feedback and viewpoints in relation to discussion, in particular Peter Burdett, Robert Savage and Christopher Romano.
All opinions are purely informational, should not be used as or in place of investment advice and are subject to change without notice subject to prevailing market conditions and developments.
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