Sterling to outperform other European currencies - Nomura

By FXstreet.com | June 26, 2014 AAA

FXStreet (Bali) - Nomura FX Strategists expect GBP to outperform the other European G10 currencies in H2.

Key Quotes

"We expect GBP to outperform the other European G10 currencies, as the BoE‟s monetary policy stance clearly diverges from that of other central banks Stronger economic momentum, which supports the BoE‟s hawkish shift, should also sustain foreign investment flows into the UK economy."

"The euro area, Switzerland, and Sweden all face risks of prolonged disinflation, or potential deflation, while the UK still enjoys healthier inflation even after the latest negative surprise."

"We expect the Riksbank to cut its policy rate at the next meeting on 3 July, while the SNB and ECB keep accommodative policies with a bias towards further easing. Inflation momentum in the Norwegian economy has been strong, but Norges Bank unexpectedly lowered its rate path significantly at the latest meeting, citing lower yields in the euro area and Sweden as one of reasons for the downward revisions."

"In this regard, the hawkish signal from Mr Carney's Mansion House speech is quite impressive. The BoE is the only central bank suggesting a possibility of tightening by year-end, while the other four European G10 central banks are pointing towards the possibility of further easing."

"EUR performance against other European G10 currencies has been more or less tracking signals from changes in yield, and we expect the BoE's very different stance on near-term monetary policy to send GBP higher against other European G10 currencies."

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