Brown administration is good for GBP...but cable still to unwind

Short, sweet Brown administration is good for GBP...but cable still to unwind

David Karsbøl says market has priced in a short stay for Blair successor, says Brown \"doesn\'t have a chance\" against David Cameron - positive for GBP, but GBP/USD to sell on USD strength

Head of market strategy David Karsbøl expects USD to move higher against GBP today, and is unloading GBP/USD today despite a fundamentally bullish outlook for sterling. He offers comment on the market outlook following British Prime Minister Tony Blair’s announcement this week that he is to step down in favor of his cabinet’s longtime man-on-deck, Gordon Brown. \"All other things being equal, the prospect of Brown as PM is positive for GBP because he is certain not to be prime minister for long,\" says Karsbøl. \"The market has priced in the business-as-usual Blair-Brown line…as well as the fact that Gordon Brown does not have a chance in an election face-off against David Cameron.\"

After a well-bid session for USD yesterday, Karsbøl expects dollar strength to continue today, with US PPI and retail sales likely to come out slightly lower than expected. \"We anticipate a trend lower in retail sales growth and producer prices, which should bear out for the rest of 2007. What’s interesting about yesterday’s development is that despite across-the-board strength for USD there was no follow-through for fixed income, which could change today, especially if cable takes a hit.\"

Equity strategist Torben Krogh Nielsen points to 1500 as the level to watch in the S&P after today’s US data releases, following massive unwinding in Dow stocks yesterday. \"The trend since mid-March has effectively broken down, and we look to today’s retail sales release to represent the nail in the coffin in the short-term bull trend from March,\" says Krogh Nielsen.

Finally, futures strategist Serge Laureau expects continued follow-through early next week after yesterday’s selloff in precious metals, which occurred on back of the surprise jag of USD strength. \"The market may see consolidation today as gold futures have ventured temporarily into oversold territory, but we are still keen to sell about $677 as the metal looks set to target $655 next week.\"