Sterling: analysts optimistic, economic surprises worsen
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STERLING: ANALYSTS OPTIMISTIC, ECONOMIC SURPRISES WORSEN
The pound has been the best-performing major currency this year and analysts are mostly optimistic that sterling can continue to gain, particularly against the euro.
Earlier this week, the pound hit its strongest level against the single currency EURGBP=D3 since April 2022, as markets bet that president-elect Trump's possible trade policies will have a greater impact on the euro area than the British economy.
This week, Barclays said they can see euro grinding down to 80 pence in the coming quarters from around 83.3 pence right now.
"The UK is likely less exposed to direct tariff risks than the eurozone given its trade deficit in goods with the US, which arguably opens up a positive tailwind for the pound," Barclays analysts said.
Goldman Sachs analysts, in their weekly FX note, said they can also see sterling benefitting versus other European FX, citing a more constructive growth outlook in the UK and baseline expectations that China stimulus should be relatively more supportive for the UK.
But, while the growth outlook might be rosier for the pound, Citi's economic surprise indexes – a gauge which measures actual data releases versus expectations - might be painting a different picture.
The euro zone economic surprise index .CESIEUR turned positive last week for the first time since June, indicating data is exceeding expectations, while Britain's .CESIGBP has fallen further into negative territory.
Something to watch going forward...
(Samuel Indyk)
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WEDNESDAY'S OTHER LIVE MARKETS POSTS:
EUROPEAN HEALTHCARE WINS AS AUTOS LOSE OUT CLICK HERE
CAUTIOUS START FOR EUROPE AFTER TUESDAY'S SLIDE CLICK HERE
EUROPEAN FUTURES POINT AT FURTHER WEAKNESS CLICK HERE
'TRUMP TRADES' PAUSE FOR BREATH BEFORE US CPI CLICK HERE
Rates and inflation https://tmsnrt.rs/3U8HdD2
European shares mostly higher https://reut.rs/3Z3i1Cb
Pound tops the pile https://reut.rs/4evEz3d
Surprise, surprise: euro zone improving https://reut.rs/3AHRktv
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