Home GBP/USD: 1.38 is the new target; staying short – Morgan

GBP/USD: 1.38 is the new target; staying short – Morgan

Cable continues battling the 1.50 line amid speculation about the timing of the next  move by the Bank of England.

Mark Carney and co. are meeting soon, but no change is expected anytime soon. The team at Morgan Stanley stays short and  revises the target down to 1.38:

Here is their view, courtesy of eFXnews:

Morgan Stanley’s bearish GBP/USD view is not just a function of a strong USD, as MS believes that outright GBP weakness is set to be a driving factor.

“Moderating UK growth, the BoE returning to a more dovish stance as the two hawks on the MPC withdraw their vote for a hike, and increased political uncertainty are likely to deter foreign investment inflows, which have been an important supportive factor for GBP over the past couple of years,” MS argues.

“The UK is faced with fiscal tightening and political policies which appear unattractive to foreign investors regardless of who wins the general election in May. As a result, we have taken our already-bearish GBP/USD forecasts even lower,” MS adds.

Indeed, GBP/USD has already accelerated the major downtrend, breaching the 1.50 level, opening the way for an initial decline towards the lows of 2013 at 1.4815. Once below here, the medium-term bearish outlook will be extended, we believe,” MS projects.

Relative Rate Expectations lead GBPUSD lower Morgan Stanley February 2015

Below-Consensus GBP:

As a result, MS has taken our GBP/USD forecasts sharply lower, expecting 1.38 by end-2015, significantly below market consensus projections

The trade:

In line with this view, MS maintains a short GBP/USD in its strategic portfolio from 1.52, with a revised stop at 1.5280, and a target at 1.40.  

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.