16 Dec 2014
Sterling benefits from risk aversion - Scotiabank
FXStreet (Guatemala) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank noted the strength of Sterling.
Key Quotes
"GBP is strong, as flows are moving away from the more vulnerable Scandies and some of the EM and into the more liquid majors, like GBP. Accordingly today’s shift is less a fundamental move and more of a risk aversion shift."
"Inflation was notably weak and much softer than expected, with CPI falling –0.3%m/m on headline and up just 1.0%y/y with core also falling to 1.2%y/y. This highlights the lack of inflaionary pressures in the UK and takes pressure off of the BoE to hike rates."
"With the release of the Financial Stability Report (FSR), the BoE highlights that:"
"1. Oil prices: posiive for global and UK growth, but poses a financial stability risk."
"2. A weakening in the global economic outlook (since June) & persistent weak nominal growth and geopoliical risks are a core risk."
"3. High household debt levels and a strong housing market are also a core risk."
"4. UK banks are on a transiion path that needs to coninue."
"Subsequently, Governor Carney reiterated that the U.K. inflaion rate is likely to fall below 1%, that the Bank will look through oil’s impact on inflaion, and that the fundamental problem in the U.K. housing system is a supply issue."
Key Quotes
"GBP is strong, as flows are moving away from the more vulnerable Scandies and some of the EM and into the more liquid majors, like GBP. Accordingly today’s shift is less a fundamental move and more of a risk aversion shift."
"Inflation was notably weak and much softer than expected, with CPI falling –0.3%m/m on headline and up just 1.0%y/y with core also falling to 1.2%y/y. This highlights the lack of inflaionary pressures in the UK and takes pressure off of the BoE to hike rates."
"With the release of the Financial Stability Report (FSR), the BoE highlights that:"
"1. Oil prices: posiive for global and UK growth, but poses a financial stability risk."
"2. A weakening in the global economic outlook (since June) & persistent weak nominal growth and geopoliical risks are a core risk."
"3. High household debt levels and a strong housing market are also a core risk."
"4. UK banks are on a transiion path that needs to coninue."
"Subsequently, Governor Carney reiterated that the U.K. inflaion rate is likely to fall below 1%, that the Bank will look through oil’s impact on inflaion, and that the fundamental problem in the U.K. housing system is a supply issue."