Post date: May 09, 2013 10:10:50 AM
Positive suprises should mean the Bank of England keeps its current monetary policy on hold, buoying the pound and pushing cable higher, but negative factors still remain and will weigh on the currency once positive impulses run their course, says Morgan Stanley's Ian Stannard.
LONDON, ENGLAND, UNITED KINGDOM (MAY 9, 2013) (REUTERS) - MORGAN STANLEY HEAD OF EUROPEAN FX STRATEGY, IAN STANNARD, SAYING:
JOURNALIST ASKING QUESTION: "Is the bank going to wait for Mark Carneybefore it does more QE?"
MORGAN STANLEY HEAD OF EUROPEAN FX STRATEGY, IAN STANNARD: "I think at this stage, given that we've seen some quite positive surprises coming through in the data, that certainly has seemed to have dampened down the quantitative easing debate in the UK. So we are expecting at this stage a need for the Bank of England to remain on a hold and not to take any further action. So as far as Sterling is concerned, I think Sterling is still likely to try and push a little bit higher in the near term benefitting from some of there to rebound in the data as well as the more positive environment which has developed over the course of recent days on the back of some positive news and data globally. So I expect Cable to perhaps just push a little bit higher over the course of the coming week or so but I do remain extremely cautious with regards to this recovery. I do believe there are still many negative factors which are going to start to weigh on Sterling once these positive impulse runs its course."JOURNALIST: "What about the Eurozone now and where the Euro's going?Slovenia, going to present its new reforms today. Will they do enough to avoid a bailout and wider repercussions?"
STANNARD: "As far as the Euro is concerned, we're going to obviously continue to have issues at the periphery of Europe. That's going to be an ongoing problem which is going to come back to weigh on the Euro. But what we have noticed recently is that the Euro has decoupled a little bit from some of those issues and decoupled from the developments within the peripheral bond markets recently as well. So the Euro's not actually being impacted quite so much by those developments of the periphery of Europe. As the focus is switched more back onto the core of Europe particularly with the recent data swings which we've seen since the beginning of the year. Obviously there was some initial negative data coming from Germany and the core countries of Europe which had been weighing on the Euro. They stabilized a little bit recently but I would be paying a lot of attention to the German export data which is due out tomorrow given that we've seen export data globally starting to slow down with the exception of China, which has gone a little bit against the trends. So it'd be interesting to see if how that German data comes in. If that comes in weak, then I'd actually expect the Euro to come back under pressure once again. So again, we are quite cautious with regards to this Euro recovery."