Pound vs the US dollar: Barclays initiate a short call on GBP-USD citing further sterling weakness to come

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Published on Thursday, 21 June 2012 10:24

Written by Will Peters

"Together this appears to have presented a tactical opportunity to sell GBP/USD" - Paul Robson at RBS.

The US dollar (Currency:USD) is preferred to the British pound at RBS; the preference has seen analyst Paul Robson call a Sell on the pound dollar exchange rate pairing.

In a note to clients Robson says:

"Soft data and the BoE policy actions to ease credit conditions have seen UK swap rates fall significantly over the past week. While G3 rates could also fall over time, the BoE looks ahead of the pack.



"We also believe that the market has mispriced the risks that the FOMC only extends Operation Twist rather than moves to QE3.

"Together this appears to have presented a tactical opportunity to sell GBP/USD, with our short-term fair value model suggesting a rate closer to 1.52 is more appropriate.

"Hence we recommend establishing short GBP/USD exposure at 1.5740, targeting a move to 1.5050, with a stop on a 2-day close above 1.6075."

Also backing further weakness in the pound sterling (Currency:GBP) are the analysts over at Jyske Markets.

In a morning note to clients Jyske Markets say:

"Minutes from BoE showed, somewhat surprisingly, that four members voted in favour of further asset purchases. This indicated that BoE will most likely launch a new programme of asset purchases of about 50bn at its July meeting. The economic indicators in the euro zone have weakened, and inflation has fallen … these are all indicators of further initiatives.

"We think that we are closer to the end of the GBP strengthening than the beginning of it."

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