19 Jul 2013
Flash: Headwinds remain for UK growth – UBS
FXstreet.com (New York) - Mansoor Mohi-uddin, Head of Foreign Exchange Strategy analyzes the outlook of the GBP relative to the latest BoE action.
Investors should stay cautious on GBP
“Investors should stay cautious on sterling – though the currency is still 20% lower in real trade weighted terms than it was at the start of the financial crisis as, the economy is picking up, and the BoE may refrain from buying Gilts again, the endgame for the pound still looks bearish particularly against the USD.”
“The recent concerns were mirrored in July's MPC minutes by those members who felt that further monetary stimulus is warranted. 'Domestic activity was recovering as quickly as envisaged in the May Inflation Report, but the pace remained too slow to begin to close the economy's margin of spare capacity.”
Moreover, “there remained significant headwinds to growth in the United Kingdom, including the effects of the fiscal consolidation, risks from the euro area and an impaired banking sector'.”
Investors should stay cautious on GBP
“Investors should stay cautious on sterling – though the currency is still 20% lower in real trade weighted terms than it was at the start of the financial crisis as, the economy is picking up, and the BoE may refrain from buying Gilts again, the endgame for the pound still looks bearish particularly against the USD.”
“The recent concerns were mirrored in July's MPC minutes by those members who felt that further monetary stimulus is warranted. 'Domestic activity was recovering as quickly as envisaged in the May Inflation Report, but the pace remained too slow to begin to close the economy's margin of spare capacity.”
Moreover, “there remained significant headwinds to growth in the United Kingdom, including the effects of the fiscal consolidation, risks from the euro area and an impaired banking sector'.”