Interesting comments from Societe General analyst Kit Juckes
"At the moment the UK rates market prices 1year swap rates at 1.24% in a year's time. But the market prices 1-year US rates at 1.28%...If the market shifts its pricing in the next few months (either re-pricing Fed rate expectations down, or bringing forward the expected timing of a UK rate hike) GBP/USD can easily get back above 1.60. All the more so if EUR/USD gets stuck in a range and the large (unsustainable?) long dollar position in the speculative FX market is reduced.
This doesn't alter my long-term view of the dangers to the UK from the most uncertain General Election I can remember, or from a huge current account deficit and a budget deficit that is dangerously big at this point in the economic cycle.
Check out bank recommendations at eFX Plus.
