Morgan Stanley previously went long in GBP/USD at 1.68 with a target of 1.7195 and stop at 1.6700. They see a short term opportunity for a return to the highs before playing the old switch-a-rooney and then going short.
By way of our friends at EFX, they cite the economic slack differentials in both the US and UK favouring the States and so the expectation shift for rates will see the US pull ahead. Bearish news for cable they say.
Race on rates means doom for the pound
After the rebound to the 1.70’s they’ll be looking for a top around Q3 2014 for a bearish run into the end of 2015
“We expect GBP/USD to become more exposed to structural factors. We believe that there is an increased chance that GBP/USD has traded a top and maintain our view that GBP/USD is set to peak in 3Q and look for a decline into year-end and 2015,”
I can see sense in their trade but I’m leaning towards the fact that we see cable lower starting tomorrow. This looks like some short covering ahead of the data tomorrow and I just can’t see Carney painting a hawkish picture given the recent data. I’d personally like to see the pound given a good whacking down to 1.67 so I can start loading some longs to run into the MPC minutes next week.
