Morgan Stanley comments on GBP via eFX.
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- "We remain neutral on GBP but continue to see downside risks. The recent upside surprise in inflation, with UK CPI rising to a 40-year high of 10.1% in July, led to a sharp repricing in the front-end of the UK rates curve but did not translate into GBP strength. We think such price action is telling of the change in the reaction function of GBP to rate differentials and market expectations of policy tightening, as more policy tightening accelerates the growth slowdown, leading to GBP weakness," MS notes.
- "We continue to see the weak growth outlook weighing on GBP. However, we do not see a material leg lower in GBP from here given how low growth expectations already are and how bearish sentiment is already on GBP. Short-term positioning remains short GBP, particularly against the EUR," MS adds.
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We get a new UK Prime Minister soon (will be announced on September 5) and thus scope for a whole new bunch of **** ups.
