Coalition fears see Morgan Stanley recommend selling the pound 1

Matthew Sinclair Economics 101

As Business Week report here, Morgan Stanley are recommending selling the pound against the dollar. The pound is currently worth about $1.48. Their target price is $1.35.

As I explained earlier, this is driven by an unfavourable comparison with Europe and the US stabilising their position and less than promising progress in the coalition negotiations:

"Currently, it seems that a pact between the Liberal Democrats and Labour party is looking increasingly likely. We think that this coalition would probably find it difficult to make the required tough spending cuts to the public deficit, risking a downgrade by the rating agencies in coming months. With the eurozone's deficit problems ring fenced for now after the weekend's larger-than-expected financial stabilisation package, the market may turn its attention to the UK's serious public finances, which are hard to decipher from the weakest members of the euro area (see Exhibit 1)."

Matthew Sinclair

Matthew is Director of the TaxPayers' Alliance, author of Let Them Eat Carbon and editor of How to Cut Public Spending (and still win an election)

Follow @mjhsinclair

Hardeep Singh

From my screen I note that the GBP/USD is hanging around between a range of prices. However I suspect that the ‘steam’ is building for a bigger fall or even step change. It’s scarey to say the least but we are entering terrifying times ahead.
How sad ……