GBP: Risks are still skewed to the downside – Morgan Stanley

Analysts at Morgan Stanley have turned neutral on the British pound, still hinting at downside risks amid the UK economic growth concerns.

Key quotes

"We turn neutral on GBP and closed our short GBP/NOK position as risk/reward for short GBP has become less attractive. That said, we think risks are still skewed to the downside for GBP as the UK faces slowing growth and the largest real disposable income hit on consumers since the 1970s.

“Despite this, markets are still pricing in too much policy tightening in our view, with more than five 25bp hikes priced in for this year. Our economists expect only two 25bp hikes for this year, in May and June respectively.”