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7 Feb 2013
Forex Flash: Negative bias reiterated on GBP – UBS
According to Research Analyst Gareth Berry at UBS, “We maintain a negative bias on sterling heading into Carney's Treasury Select Committee testimony and final appointment as BoE Governor. The rationale relating to more aggressive policy needs no repeating, and it is apt to draw comparisons with the Bank of Japan, where a change in government and central bank expectations have resulted in a significant decline in the currencies”
On the other hand, some other less charitable parallels have also been drawn – in Japan's case, sizeable easing has been undertaken for some time now, and it is difficult to see what the market is pricing in the JPY short of outright purchases of foreign bonds.
Indeed, in assessing candidates for the next BoJ Governorship and their corresponding effect on the currency, the most important quality is perhaps the individual's attitude towards such purchases. Looking at the UK, £375B of initial quantitative easing did little to weaken the pound. Even the knee-jerk reaction to Carney's appointment was to buy the pound (and sell the CAD).
On the other hand, some other less charitable parallels have also been drawn – in Japan's case, sizeable easing has been undertaken for some time now, and it is difficult to see what the market is pricing in the JPY short of outright purchases of foreign bonds.
Indeed, in assessing candidates for the next BoJ Governorship and their corresponding effect on the currency, the most important quality is perhaps the individual's attitude towards such purchases. Looking at the UK, £375B of initial quantitative easing did little to weaken the pound. Even the knee-jerk reaction to Carney's appointment was to buy the pound (and sell the CAD).