UK: Sterling still bumping along the bottom - SocGen

Kit Juckes, Research Analyst at Societe Generale, points out that EU negotiator Michel Barnier today said talks had reached an impasse, and reminded us that ‘No deal will be a very bad deal’ for good measure.

Key Quotes

“GBP/USD is down just over ½% at the time of writing, though poor housing data from the RICS survey, tightening unsecured credit conditions reported in the BoE’s Credit Conditions survey, and labour cost data showed overall labour costs rising significantly faster than wage costs last year. All of which confirms to our minds that the economy faces a series of headwinds, even as the MPC seems ready to raise rates and the government seems intent on flirting with the idea of a rock-hard exit from the EU.” 

“Sterling though is really going nowhere. Over the last twelve months, GBP/USD has gained 7.7% and EUR/USD 7.6%. EUR/GBP has dipped under 0.84 and risen to 0.93, but it is back at 0.90. For choice, we think EUR/GBP has more upside, in part because valuations are less of a challenge. But if you think the Brexit mood is so negative that things can’t get worse, and if you think that the dollar’s had and squandered its chance of a major correction against the euro, then GBP/USD longs can appeal at current spot levels.”