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Euro and sterling qualify as 'cheap'

Publication Date: 16 May 2019 - By ReachX Team By ReachX Team
Actionable
Differentiated

Macro FX UK EU ex-UK

Both the euro and pound sterling qualify as cheap and are still being held back by politics in the UK and growth/monetary policy in Europe, according to a leading city analyst.

In a note to clients, Kit Juckes, Head of FX at Société Générale, said EUR/USD needs to break 1.1266 or 1.1120 to be worth talking about. 

“I've plotted the sterling real effective exchange rate (see above). It's a very long-term chart but it does show how sterling eventually recovered after the three big crises we saw before the EU one: The late 70s were helped by North Sea oil, the mid-90s by Bank of England independence and a strong economic recovery, the 2012-2015 period by strong growth.”

Juckes said when all the dust settles, the UK economy will move from Brexit and in the absence of inflation, sterling will bounce too. 

But there are still months of uncertainty ahead and the market is worried about the possibility both of a Labour Government and a no-deal Brexit.

“EUR/GBP has risen for 9 days in a row, but it's still below the 2019 average. I'll think about shorting at 0.88, and am still regretting not buying euros at GBP 0.85,” Juckes added. 

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX Team

 

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