It was no surprise to me to see sterling weaken against the US dollar yesterday. I have been calling the pound lower for some weeks, and was looking for downside as we went into yesterday. However, the extent of the move did catch me out a little bit. A 1.6% drop is a big deal in the world of currencies, and there has been further bearish follow-through overnight.
While the DAX and FTSE came off as well yesterday, I am sticking to my bullish outlook for now. I don’t see the negative moves in GBPUSD and EURUSD as being harbingers of doom for equities. The underlying case in favour of stocks – cheap money and economic improvement remain intact.
I seek a long position in the FTSE and EURGBP, and I expect more downside in GBPUSD and EURUSD.
Click here for PDF version.