Sterling To Slip Despite Data: FX Strategist
Sterling will weaken, despite reaching session highs on better-than-expected U.K. economic data on Thursday, foreign exchange strategist Hans Redeker told CNBC.
Redeker, the global head of forex strategy at Morgan Stanley, said the broader economic picture in Britain pointed towards a falling pound.
His comments followed manufacturing and industrial output data for the U.K. which beat expectations and pushed sterling to a session high against the dollar and euro.
It rose by 0.3 percent following the release of the figures, and was trading 0.17 percent higher at$1.5557 in early-afternoon London trading.
"Data certainly is improving and there is a cyclical component which has been supportive for sterling," he said.
"But then you have to make sure that you're seeing the entire environment in the U.K. and that, I think, is still pointing towards a weaker sterling."
Saeed Amen, a forex strategist at Nomura, disagreed, saying sterling could edge up in the near future.
"We've got major resistance at around $1.56 and if it breaks through that it could move higher," he said.
According to Redeker, however, there is "much more" deleveraging to be done in the private sector, and the U.K.'s banking sector is running balance sheets that are too large.
He added that, as a result, "it is very clear that the U.K. does need support from income from abroad and that actually requires a weaker exchange rate."
Redeker said the Bank of England gave a clear message that rates in Britain would stay low when it outlined a flexible interpretation of inflation targets in January.
"That statement was a clear manifestation that the monetary authority wanted to have a weaker exchange rate," he said.
"The market is going to understand that very, very clearly and the next move of sterling is going to be down and not up."