British Pound Sterling: Lloyds Bank forecasting further squeeze higher in GBP as CBI call for 'unrelenting' focus on infrastructure growth
A look at the wholesale spot markets on Monday morning in London shows:
The pound euro exchange rate is 0.32 pct up on Friday's close at 1.1890.
Thepound euro exchange rateis 0.33 pct higher at 1.5684.
The pound Australian dollar exchange rate is 0.11 pct higher at 1.7141.
Please be aware that these are spot market quotes and your bank will affix a discretionary spread to the figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please find out more here.
Lloyds Bank Research warn that more of those currently holding bets against the British Pound could be forced to close these positions, thus driving GBP higher:
"GBP net short positioning remains at extended levels, however we see risks GBP shorts could get squeezed.
"Last week saw a further improvement in the PMI Surveys and there were some relatively hawkish comments over the weekend from BoE Member Paul Fisher (who was one of the members that have voted for more QE earlier this year), who suggested that the BoE would hold off announcing more stimulus if forward guidance worked.
"He viewed households and businesses were getting the message and thought the recent better data suggested that the policy was kicking in. There are few events in the UK that will be of interest this week.
"David Miles (who also advocated more QE earlier this year) speaks on Wednesday followed by the Treasury Select Committee hearing on the Inflation report on Thursday.
"However, the main event of the week will be the labour market statistics on Wednesday.
"The market is expecting a further decline in jobless claims, and our economists forecast a slight decline in the
unemployment rate to 7.7%. We see potential for further squaring on GBP short positions on the releases this week, which should prompt further GBP upside."
[Data from the major US futures & options exchanges (CFTC) are released each Friday evening and report positions up to the close of business on the previous Tuesday. Traders are classified as either commercial or non-commercial. The positioning of the non-commercial traders can be used as a proxy for the speculative side of the market. Extreme net long or net short positions are taken as an indication of the market’s vulnerability to a sharp reversal.]
Monday: Osborne welcomes economic growth, CBI say infrastructure spending must not be forgotten
Turning to domestic matters on Monday we note the Chancellor George Osborne welcomed the return to growth:
"The economic collapse was even worse than we thought. Repairing it will take even longer than we hoped.
"But we held our nerve when many told us to abandon our plan. And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner.
"Of course, many risks remain. These are still the early stages of recovery. But we mustn't go back to square one. We mustn't lose what the British people have achieved."
The Confederation of British Industry (CBI) has however warned that the focus on infrastructure investment can not be waived
John Cridland, CBI Director-General, responds:
“The economy is gathering some momentum and with business confidence on the up, supported by greater interest rate certainty, we expect growth to continue into next year.
“But to deliver a sustainable recovery we need stronger levels of business investment and trade to rebalance the economy, so we must get behind smaller firms who are ambitious to export.
“We have always said that deficit reduction should be at the top of the Government’s ‘to-do list’, but it must be coupled with an unrelenting focus on growth-boosting measures like infrastructure projects.”