7 Aug 2013
Flash: GBP in focus ahead of key Inflation report - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that GBP is in focus with improving UK data ahead of the key Inflation report.
Key Quotes
“UK manufacturing production growth was in a steady downtrend from the end of 2010 to the start of this year. Average output in the last three months is still lower than it was a year ago but it’s the change in the trend that matters.”
“The Inflation Report will surely observe improved credit conditions throughout the economy too. All in all, that’s a strange backdrop to the introduction of forward guidance on monetary policy.”
“BOE Governor Mark Carney’s success with forward guidance in Canada is part of his CV, but ‘reaching over the heads of markets’ and telling the people of the UK that rates will stay low for a long time, won’t have so much effect.”
Rate expectations are already low. As for markets, the biggest effect may be on inflation expectations. Breakeven inflation rates on index-linked gilts are well above those on US Treasuries, but could move higher.”
“GBP/CHF remains a quiet buy, and if we get an outsized reaction (lower) in UK swap rates and shorter-dated gilt yields, I think that would represent a longer-term trading opportunity.”
Key Quotes
“UK manufacturing production growth was in a steady downtrend from the end of 2010 to the start of this year. Average output in the last three months is still lower than it was a year ago but it’s the change in the trend that matters.”
“The Inflation Report will surely observe improved credit conditions throughout the economy too. All in all, that’s a strange backdrop to the introduction of forward guidance on monetary policy.”
“BOE Governor Mark Carney’s success with forward guidance in Canada is part of his CV, but ‘reaching over the heads of markets’ and telling the people of the UK that rates will stay low for a long time, won’t have so much effect.”
Rate expectations are already low. As for markets, the biggest effect may be on inflation expectations. Breakeven inflation rates on index-linked gilts are well above those on US Treasuries, but could move higher.”
“GBP/CHF remains a quiet buy, and if we get an outsized reaction (lower) in UK swap rates and shorter-dated gilt yields, I think that would represent a longer-term trading opportunity.”