17 Jan 2014
GBP/USD, a structural short? - Societe Generale
FXstreet.com (Guatemala) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes fundementals around the UK affecting the pound.
Key Quotes
"Good news for the good bit of the UK economy. Sell GBP/USD... UK retail sales were 0.8% higher in Q4 than in Q3 (ex fuel, 0.4% overall) and 3.6% higher than in Q4 2012. Retail sales and real GDP can decouple but mostly they move in roughly the same direction. Slightly scarier is the fact that retail sales volumes are some 5.2% higher than they were when GDP itself peaked in Q1 2008."
"We don't have Q4 GDP data yet, but unless we see an increase of 2%, GDP will remain below its peak level. That is a huge gap between overall output and retail sales. Irrespective of the volatile nature of the data the UK's resurgent consumer will help drag GDP growth higher but I am alarmed by the divergence between output and retail sales, with the implications that has for the trade deficit in particular."
"As for Mark Carney and the MPC, they will look to the FPC to try and deliver policies that temper the over-excitement in the housing market in particular, and help build a more balanced economy, without resorting to tighter monetary policy. And in the meantime, GBP/USD has gained half a percentage point to its best level in... a week. And that's why I think current GBP/USD levels are near the top of a longer-term range and represent an opportunity for structural shorts."
Key Quotes
"Good news for the good bit of the UK economy. Sell GBP/USD... UK retail sales were 0.8% higher in Q4 than in Q3 (ex fuel, 0.4% overall) and 3.6% higher than in Q4 2012. Retail sales and real GDP can decouple but mostly they move in roughly the same direction. Slightly scarier is the fact that retail sales volumes are some 5.2% higher than they were when GDP itself peaked in Q1 2008."
"We don't have Q4 GDP data yet, but unless we see an increase of 2%, GDP will remain below its peak level. That is a huge gap between overall output and retail sales. Irrespective of the volatile nature of the data the UK's resurgent consumer will help drag GDP growth higher but I am alarmed by the divergence between output and retail sales, with the implications that has for the trade deficit in particular."
"As for Mark Carney and the MPC, they will look to the FPC to try and deliver policies that temper the over-excitement in the housing market in particular, and help build a more balanced economy, without resorting to tighter monetary policy. And in the meantime, GBP/USD has gained half a percentage point to its best level in... a week. And that's why I think current GBP/USD levels are near the top of a longer-term range and represent an opportunity for structural shorts."