This page has been archived and commenting is disabled.

Goldman's Stolper Says To Go Long EURGBP With 91.00 Target

Tyler Durden's picture





 

If there is one firm that would know what the arrival of a Goldmanite at the head of the BOE means for the GBP, and specifically EURGBP, it would be Goldman. Moments ago Goldman's Tom Stolper just poured more gas into the EURGBP "parity" fire, sending the EUR spiking. That said, the logical Stolper-contrarians in us say this is precisely the time to fade the relentless move higher in the EURGBP: history is on our side about 93% of the time. After all, Goldman's prop flow desk is now selling the pair to its clients. This is even as we said to short the GBP with both hands and feet in late November when Carney's appointment was announced: a move that has resulted in nearly a +1400 pip gain in the GBPUSD short. Oh well, time to take profits.

From Goldman:

Go long EUR/GBP on monetary policy and current account differentials

We have long held the view that Sterling is likely to weaken relative to the Euro. The key drivers of recent Sterling weakness remain in place:

While the Bank of England will likely continue to ease monetary policy, in particular under next Governor Carney, the ECB appears to be firmly on hold and shrinking passively its balance sheet.

  • Notably higher inflation rates in the UK than in the Euro area could gradually further erode the UK's competitiveness.
  • As discussed in Monday’s Global Markets Daily, expectations of monetary easing by the Bank of England have driven inflation expectations higher. As a result, real interest rate differentials have widened to levels consistent with EUR/GBP closer to 0.90 on a historical comparison.
  • As Euro area-related risk premia decline, the safe haven flows that boosted the Pound vis-à-vis the Euro have reversed. In our view, this has been the main driver of the EUR/GBP move so far. Despite some Italy-related risk currently, we think this trend will persist.
  • The trade and current account balances of the Euro area are now in far better shape than in the UK. While the Euro area records current account surpluses in the 1% of GDP area, the UK’s current account has shown volatile deficits in the 3% area.
  • The ongoing political debate about the benefits of EU membership could weaken the prospects for long-term investment inflows into the UK.
  • Option markets and IMM data suggest speculative short GBP positioning remains close to neutral.

On balance, all these factors suggest that the weak Sterling trend will continue despite a sizable move already. In terms of risks to this view, we would emphasise the renewed escalation of the Euro area crisis, clear evidence of external rebalancing in the UK or indications that the BoE may not ease further.

We would go long EUR/GBP with a stop on a close below 85.70 for an initial target of 91.00. We think the weak Sterling trend will continue, in particular on the back of continued monetary policy easing in the UK.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 03/12/2013 - 09:24 | Link to Comment eclectic syncretist
eclectic syncretist's picture

Lloyd Blankheart wills it to be so, and so it shall be so, in all the kingdoms, of all the lands.

Tue, 03/12/2013 - 09:50 | Link to Comment magpie
magpie's picture

Doing God's work...must smash Pound below Euro parity...force them into the Euro kicking and screaming...before the FED nukes everything with a rate hike.

How about the 'Carney trade' short GBPCAD

Tue, 03/12/2013 - 09:25 | Link to Comment Comay Mierda
Comay Mierda's picture

it may hit 91.00 eventually, but right now its giving off sell signals from the oscillators.  hence the goldman buy recommendation

Tue, 03/12/2013 - 09:28 | Link to Comment hbkshivamgoel
hbkshivamgoel's picture

short below 0.877 else going to 0.90 and then 0.93..

Tue, 03/12/2013 - 09:31 | Link to Comment Comay Mierda
Comay Mierda's picture

ill bet goldman will sell this shit into its clients at .88

Tue, 03/12/2013 - 09:28 | Link to Comment hbkshivamgoel
hbkshivamgoel's picture

short below 0.877 else going to 0.90 and then 0.93..

Tue, 03/12/2013 - 11:07 | Link to Comment Orly
Orly's picture

Don't trade anything in "uncharted' territory. Wait for it to make a chart so you can see what's going on.

:D

Tue, 03/12/2013 - 09:35 | Link to Comment tetsujin
tetsujin's picture

should have been long EURGBP from 0.81. 8, 21 EMAs cross... simples.

Tue, 03/12/2013 - 09:49 | Link to Comment MoneyThangs
MoneyThangs's picture

Can't blame them, I haven't seen a sell off this bad - time to buy the dip if you ask me

Tue, 03/12/2013 - 10:40 | Link to Comment JOYFUL
JOYFUL's picture

 You've set us up with the reports of Papal conclaves and now this piece, and all the ducks are in a row for drawing the obvious conclusions...maybe it's reader interactive day here on ZH, so I'll follow your set up and fill in the blanks...

Canada's candidate cardinal as quoted in your previous; “It would seem that, in the name of secularism, the Bible must be relativized, to be dissolved in a religious pluralism and disappear as a normative cultural reference,”

Canada's new Goldmanite Governor of the original "Money from Nothin" Bank of England; “We will not remind market participants of the many oaths they swore a year ago; nor do we expect scores of financiers to join religious orders. However, we do expect those fevered battlefield vows to be respected through daily peacetime concern for and contributions to building a better, more resilient financial system …"

England's iconic author DH Lawrence; The science of the augur and the haruspex was not so foolish as our modern science of political economy.If the hot liver of the victim cleared the soul of the haruspex, and made him capable of that ultimate inward attention which alone tells us the last thing we need to know, then why quarrel with the haruspex? from "ETRUSCAN PLACES" 1933

Using my infallible Etruscan divinatory analytic tool*, I am going long Mark Carney for Pope , and expect a consolidation of both headquarters into the confines of the City of London independent state Thameside, wherefrom the new masters of the universe may perform both GOD'S WORK, and the more pedestrian tasks incumbent upon the mortals entrusted with the normative cultural reference of usury\debt  based compulsory worship of secular financiers as God's of Men...in the('stripped down')City of God =big savings in 'rent boys' outbilling!

It's a logical step in this new era of austerity, and expression of solidarity with the people's of Eurodom in their time of trial; a veritable Kingdom of God upon this Earth, in which His chosen may prosper according to their works, instead of faith alone! Calvin and Cabbala finally co-joined in plutocratic pluralism. Carney and Oulette? Ten to one they never appear in the same room together!

*free to try for 30 days...obligatory blood sacrifice victims not provided!


 

Tue, 03/12/2013 - 10:33 | Link to Comment Iocosus
Iocosus's picture

EUR/USD spiked this morning on no news. Did Stolper recommend a short position on this pair?

Tue, 03/12/2013 - 11:09 | Link to Comment Orly
Orly's picture

Selling EJ into equity weakness...

Tue, 03/12/2013 - 11:41 | Link to Comment Iocosus
Iocosus's picture

EUR snapped back close to 8 am level.

EJ scares the heck out of me- not saying that Draghi is not a psychopath, but this new Jap Finance Minister sounds like the reincarnation of a Kamikaze Zero.

Tue, 03/12/2013 - 11:45 | Link to Comment Orly
Orly's picture

You mean the papier-mache aeroplane filled with highly flammable gasoline?  Doesn't sound very dangerous on the whole.

:D

Wed, 03/13/2013 - 05:03 | Link to Comment hbkshivamgoel
hbkshivamgoel's picture

eurgbp targetting 0.856a and then 0.84h

Do NOT follow this link or you will be banned from the site!