14 Oct 2013
Flash: Buy the pound and sell gilts – Societe Generale
FXstreet.com (London) - Kit Juckes, Global Head of currency Strategy at Societe Generale said to buy the pound and sell guilts.
Key Quotes:
“The core of my view on the pound and gilts, is that demographics are putting a strain on the UK's infrastructure which is a major factor in keeping inflation higher than in the Euro Area or the US, and can cause UK inflation to rise relative to both in the coming year or so”.
“Some of the money that drives London house prices up is, as the NYT says, coming because it thinks London houses are a reserve asset; but outside Kensington, and closer to SG House in Tower Hill, the driver of residential property in Wapping, Shoreditch and Whitechapel looks like an influx of people looking for work in London”.
“The UK economy has long been over-sensitive to housing, finance and the South-East. That isn't healthy. Trying to re-balance by talking the pound down was just silly and I'm glad we seem to over that. What are needed are far-reaching structural changes, to boost infrastructure and transport, and re-focus education towards a wider range of industries. But that hasn't happened and now that the UK economy is finally beginning to emerge tentatively from the post-Lehman shadows, it looks as though it is going to behave much as it did before”.
“Gazzumping and consumption, here we go. And the more that happens, the more markets are going to price in a return to the past in terms of an overvalued currency and a higher level of interest rates than the US or Europe need or want”.
Key Quotes:
“The core of my view on the pound and gilts, is that demographics are putting a strain on the UK's infrastructure which is a major factor in keeping inflation higher than in the Euro Area or the US, and can cause UK inflation to rise relative to both in the coming year or so”.
“Some of the money that drives London house prices up is, as the NYT says, coming because it thinks London houses are a reserve asset; but outside Kensington, and closer to SG House in Tower Hill, the driver of residential property in Wapping, Shoreditch and Whitechapel looks like an influx of people looking for work in London”.
“The UK economy has long been over-sensitive to housing, finance and the South-East. That isn't healthy. Trying to re-balance by talking the pound down was just silly and I'm glad we seem to over that. What are needed are far-reaching structural changes, to boost infrastructure and transport, and re-focus education towards a wider range of industries. But that hasn't happened and now that the UK economy is finally beginning to emerge tentatively from the post-Lehman shadows, it looks as though it is going to behave much as it did before”.
“Gazzumping and consumption, here we go. And the more that happens, the more markets are going to price in a return to the past in terms of an overvalued currency and a higher level of interest rates than the US or Europe need or want”.