Morgan Stanley report they entered a short on GBP/USD at the NY close on Thursday (12 November)
They cite:
- Last week's dovish turn from the BoE makes sense in light ofupcoming headwinds facing the UK.
- First, significant front-loaded fiscal consolidation is likely to weigh on growth.
- Second, the Brexit debate will heat up soon and potentially deter foreign portfolio and direct investment flows into the country.
- This is particularly problematic given the UK's large current account deficit.
- Finally, underlying sources of labour market health, such as hours worked and weekly earnings, are turning.
- The main risk to this trade is a resurgence in UK economic data.
Target is 1.4600, stop loss is 1.5450.
