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

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

Euro Rounds Up the Usual Suspects as Going Short Proves Lethal

  Euro Rounds Up the Usual Suspects as Going Short Proves Lethal (Bloomberg) -- Hedge funds. Asset managers. Central banks. These are just some of the players in the $5.1 trillion-a-day currency market who are buying the euro after shunning it over the past three years. The shared currency has snapped its losing streak to become the best performer among Group-of-10 peers in 2017. After plunging to a 14-year low in January, the currency has staged a stunning comeback, rising to $1.1910 on Aug. 2, a level not seen since January 2015. © Lananh Nguyen BC-EURO-USUAL-SUSPECTS “To be short euros here is absolutely lethal,” said Ulf Lindahl, chief executive officer of A.G.

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)

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.

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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.”

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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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.


PL paying price of falling pound? .
Are Premier League clubs getting less for their money because of the fall of the pound? Sky News Business investigatesPremier League clubs are paying more for transfers because of the drop in value of British pound sterling against the euro, but could end up with an end-of-season windfall, says Sky News Business correspondent Ian King.

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

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