Money Morgan Stanley Sees Euro-Pound Parity on Diverging Political Fortunes

11:31  12 august  2017
11:31  12 august  2017 Source:   Bloomberg

Brace for Pound Turbulence as Economics and Politics Collide

  Brace for Pound Turbulence as Economics and Politics Collide The pound may be in for a bout of volatility, according to analysts at ING Groep NV, after a week that saw the currency confined to its tightest range versus the dollar in almost three years. Sterling slipped to its weakest level versus the euro in 10 months on Aug. 11, a day after data signaled sluggish U.K. growth, prompting money markets to push back bets on the timing of a Bank of England interest-rate hike. Morgan Stanley revised its forecasts to predict parity in euro-sterling, which would be a record.

Bank projects common currency will reach parity with pound . Now Europe’s institutional investors have a slew of good economic and political reasons to buy assets priced in euros closer to home, according to Morgan Stanley .

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Watch: 'The key driver of sterling is Brexit' (CNBC)

Everyone's Dumping the Pound, and Real Money's Just Starting

  Everyone's Dumping the Pound, and Real Money's Just Starting The pound remains unloved across investor groups, with real-money sales of the U.K. currency only just getting started, data from Bank of America Corp. show.All client types -- corporate accounts, reserve managers, hedge funds and institutional accounts, like mutual funds, pensions and endowments -- have dumped sterling over the past two weeks, according to the U.S. bank’s analysis of flow data.

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A pushback against the populist movements that have threatened to destabilize the European Union will help bolster the euro for years, according to Andrew Sheets, chief cross-asset strategist at Morgan Stanley.

The U.S. investment bank raised its forecasts for the shared currency on Thursday, projecting it would reach $1.25 early next year, and trade one-for-one against the pound for the first time. This is a “multi-year call” for a stronger euro, Sheets said in an interview with Bloomberg TV’s Guy Johnson on Friday.

BC-MORGAN-STANLEY-ON-EURO © Natasha Doff and Sid Verma BC-MORGAN-STANLEY-ON-EURO

“What markets will focus on is this idea that the core of Europe, France and Germany, are working toward a stronger European Union, making a push toward reform that we haven’t seen in a number of years,” Sheets said. “That’s structurally bullish for the euro.”

Sterling at 10-month low vs euro as bears tighten grip

  Sterling at 10-month low vs euro as bears tighten grip Sterling tumbled to a 10-month low against the euro on Tuesday as weak inflation data and concerns about protracted negotiations with euro zone authorities prompted investors to pile negative bets against the British currency. LONDON (Aug 15): Sterling tumbled to a 10-month low against the euro on Tuesday as weak inflation data and concerns about protracted negotiations with euro zone authorities prompted investors to pile negative bets against the British currency.

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BC-MORGAN-STANLEY-ON-EURO © Natasha Doff and Sid Verma BC-MORGAN-STANLEY-ON-EURO

The common currency has soared 12 percent against the dollar this year amid improving economic growth and as fears of a populist revolt against the European Union diminished when pro-establishment politicians won elections in France and the Netherlands. A vote in Germany next month is giving more cause for optimism as polls suggest German Chancellor Angela Merkel will comfortably win a fourth term.

Increasing demand from pension and insurance funds from Switzerland and Japan will add fresh momentum to the year’s best performing Group-of-10 currency in the coming months, as investors scale back hedges and increase positions in euro-denominated assets, Morgan Stanley strategists including Hans Redeker wrote in a research note published Thursday.

Traders who adopt trend-following strategies have ridden this year’s euro rally, followed by speculators who in recent months have built up the biggest net-long positions in six years. Now Europe’s institutional investors have a slew of good economic and political reasons to buy assets priced in euros closer to home, according to Morgan Stanley.

Meanwhile, the bank is bearish on the pound, and not only because of its bullish outlook for the euro. It reckons sterling is poised for another downward march amid weak growth, low inflation-adjusted yields and increased political uncertainty as it exits the European Union.

The euro advanced 0.3 percent to $1.181 on Friday, putting it on course for a fifth week of gains, the longest stretch since January. The pound weakened 0.1 percent to $1.297.


United to miss out on Perisic who decides to stay at Inter .
Ivan Perisic has decided that he will remain at Inter Milan this summer, according to Corriere dello Sport journalist Xavier Jacobelli, as cited by the Daily Star. Manchester United and Inter Milan have held discussions throughout the summer over a deal for the Croatian, but have been unable to agree on a fee for the player. Perisic has been earmarked as one of Jose Mourinho’s key summer signings as he went in search of additional width in his squad. Inter were thought to be demanding somewhere in the region of £48 million for the player who they signed from Wolfsburg in 2015 for just shy of £15 million. United have been busy in the summer transfer window already, signing Romelu Lukaku, Victor Lindelof and Nemanja Matic, with the latter the most recent arrival at Old Trafford. Both Lukaku and Matic played a key role in United’s 4-0 thrashing of West Ham on the opening day of the season.

Source: http://uk.pressfrom.com/news/money/-193459-morgan-stanley-sees-euro-pound-parity-on-diverging-political-fortunes/

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