Why I became a sterling bull last week for a 1.30 cable target

Plenty of Collectible Coins

The political drama in Westminster last week was pure Sophocles, as nemesis gutted Boris Johnson’s hubris. Boris Johnson’s agenda for a “do or die” hard Brexit was killed by two humiliating defeats in the House of Commons parliamentary votes and a bitter schism in the Conservative Party (and the UK Cabinet) after the Prime Minister expelled 21 Tory rebel MP’s who voted against the government. This led to the mother of all sterling rallies I had expected all summer and cable rose 3% to 1.23 after falling to three year lows on Monday.

The City of Londonium, obviously, is as skeptical about Johnson’s cherished no deal Brexit as the rebel Tory MP’s, the opposition parties in Parliament and even his own brother Jo Johnson, who quit the party as he claimed Boris was not governing in the “national interest”.

Of course, the pop in sterling is modest compared to its steep fall since June 23, 2016, the day when the British electorate voted 52 – 48 to leave the EU in history’s biggest economic own goal. Sterling was, after all, 1.50 against the US dollar on the eve of the Brexit referendum. The Labour Party has even rejected Boris Johnson’s plea for a snap early election in mid-October as a ploy to railroad hard Brexit before the October 31 deadline. The conclusion is unmistakable.

One, Boris Johnson is now a political zombie in 11 Downing Street. Two, the Article 50 exit deadline will be extended to January 2020 as a 31 October no deal Brexit is now impossible. Three, the UK could be all set for a general election that the Conservative and Unionist Party will not necessarily win. Four, I expect the sterling to trade significantly higher, to as high as 1.30 in the next six weeks. Those who gaze into a crystal ball on Planet Forex must be prepared to swallow crushed glass – but I am a sterling bull now on momentum, positioning and option market skews, not the eventual political risk of Prime Minister Jeremy Corbyn, a Marxist Leninist/socialist in the classic pre-Tony Blair Labour Party tradition.

The key variables now are the timeline of another Article 50 extension and the possibility of an eventual UK-EU trade deal, that would be a steroid shot for sterling, which could well soar to 1.34 – 1.36 if Brussels and London finally negotiate a deal. I would not rely on a House of Lords filibuster if I were Boris Johnson – Old Etonian earls, dukes and baronets who inherited their titles cannot match the political power of the elected House of Commons. Poor King Charles Stuart learnt this lesson the hard way when he lost his head off Trafalgar Square (then Whitehall palace) in the English civil war.

It is ironic that Boris Johnson, the biographer of his hero Winston Churchill, may go down in history as Neville Chamberlin, who was also dethroned by Tory rebel MP’s voting in concert with the Labour Party after Hitler’s armies overran Norway.

Sterling’s fate hinges on the outcome of the next British general election. Ordinarily, sterling bulls would be terrified at the prospect of a left wing Labour government under Jeremy Corbyn determined to nationalize industries, raise taxes and hostile to shareholder capitalism. Yet Jeremy Corbyn has one redeeming quality – he wants Britain to remain in the EU. Polls (a dubious gauge to the future at the best of times) suggest that Corbyn will be able to form a coalition government with the resurgent Liberal Democrats (who will take Tory seats in the Home Counties), the Scottish Nationalists and the Greens. This would be a sterling bullish scenario as long as Corbyn’s coalition partners dilute his loony left tendencies and force him to move to a traditional center-left position. The other scenario is that Prime Minister Johnson allies with Nigel Farage’s Brexit Party and manages to secure a parliamentary majority. Since the financial markets are horrified by the prospect of no deal Brexit, this will mean a sterling collapse, possibly down to 1.15.

Political uncertainty since June 2016 has taken its toll on the UK economy. The plunge in sterling and the rise in food/petrol prices has hit consumer real wage growth. Property prices in prime London’s West End have fallen by 20 – 25% since the Brexit vote as offshore buyers shun UK assets. Manufacturing and construction are in contraction and High Street retail is in distress. However, the mediocre 130,000 growth in US non-farm payrolls and manufacturing recession means the Federal Reserve will cut the overnight borrowing rate by 25 basis points and issue a dovish statement at the September 18 FOMC conclave. This will lead to a dip in the US dollar and reinforce the momentum of the sterling bulls, a tribe to which I now belong.

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Meghna Agrawal

Meghna Agrawal, has 7 years of experience in corporate finance industry.  Currently she is a part of our investment banking and private equity team focused on creating long term value for our clients as a Senior Analyst.

Prior to ASAS Capital Ltd, she worked as a Finance controller in UAE’s largest airline “Emirates Airlines” and E&Y. 

She is a CFA charter holder and a qualified ACCA

Rajesh Gupta

Rajesh is a Chartered Accountant and an Executive MBA from NMIMS, Mumbai, India and have over 22 years of experience, including more than 16 years relevant experience in Investment Advisory and Portfolio Management.

Key competency areas are equity research, portfolio management, data analysis with deep understanding of business requirements in various international environments; well versed with regulatory requirements for financial services in different geographies such as India, UAE, Cayman Islands, and Mauritius.

Goneta Jakurti

Goneta, prior to her place in the Asas Team, spent over a decade at UBS in roles such as Trade Date Services, Fixed Income & Structured Products, JUNA Financial Products, Fixed Income Execution Trading and Securities, Specialist B4B Settlements & Implementation. She was furthermore the client Service Officer at Artorius Wealth, Zurich.

She holds a degree of Bachelor of Science in Business Administration from Fachhochschule Nordwestschweiz FHNW, Switzerland and speaks French, Italian, Spanish, Dutch, and Albanian.

Sana Javed

Sana Javed, has an experience of 13 years in the finance, corporate and private banking in the GCC region. Currently she is a part of our investment banking and private equity team focused on creating long term value for our clients as an Associate Director.

Prior to Asas Capital LTD, she was Finance Manager at Alghanim Industries a Kuwait based conglomerate, in Corporate banking with Citibank, MCB Bank, Mashreq Bank and Emirates NBD bank at various relationship management roles.

She holds a degree is Accounting and finance from Lahore University of Management Science in Lahore, Pakistan

Mangesh Shringarpure

Mangesh has over 25 years experience in financial services in UAE and India. He has worked for prestigious banks such as Standard Chartered Bank, BNP Paribas and Emirates NBD in Dubai. He was the Head of Priority Banking at SCB and BNP Paribas. At Emirates NBD Private Banking, he led a team of private bankers catering to the NRI segment and subsequently became Head of the Institutional Investor Group.

Mangesh has wide experience in investment products, financial advisory and wealth management. He holds a Masters in Management Studies from Mumbai University. 


Sanjeev Saxena

Sanjeev leads the Private Wealth Management business at Asas Capital. He has over 28 years of experience in Wealth Management, Banking, and Operations with Standard Chartered Bank and RAKBank. His most recent role was part of the Leadership Team at RAKBank. 

Sanjeev has been instrumental in launching new businesses as well as restructuring and turning around businesses. He holds a Bachelor of Engineering and a Masters in Business Administration from the University of Delhi.

Matein Khalid

Matein has 25 years of experience in international capital markets as an advisor to family offices and fund managers. He has worked for investment banks/hedge funds in New York, Chicago, London, and Geneva. In addition, he has been the CIO of a technology fund in San Francisco, a royal investment office in Dubai and a public insurance company listed on the DFM. 

Matein has four degrees in finance, economics and international relations from the Wharton School, University of Pennsylvania. He writes capital markets advisory columns for Khaleej Times, Gulf Business and Oman Economic Review and was awarded ICAEW prize for excellence in financial journalism, December 2011. He was also selected by MENA Fund magazine in MENA Power List, 50 most influential fund managers in the Middle East.

Himanshu Khandelwal

Himanshu has 15 years of experience in investment management across asset classes. He has been with Asas since its inception managing the proprietary equity investments and has executed numerous private equity transactions. Currently he heads our investment and advisory teams focused on creating long term value for our clients. 

Prior to Asas Capital, Himanshu worked as a portfolio manager in India’s largest financial services company, Kotak Securities with over USS$ 400 million assets under management. He also held analyst roles in reputable firms like CNBC and Bank of Baroda. He is a CFA charter holder and holds a Master’s degree in Business Administration from IBS Hyderabad.

Riyad Alhoraibi

Riyad has over 15 years of successful experience in Capital markets and Private Equity Investments. Prior to this, he was the CEO and Co-Founder of Sahara Global Investment, a propriety investment company based in Dubai. Riyad started his career working in the family business running for 50 years based in Jeddah, Saudi Arabia. 

The business has interests in retail, trading, real estate, and hospitality. Moving to Dubai, he made a move into investment banking starting at HSBC and then setting up Sahara Global Investment. He holds a degree in Bachelor of Economics and completed his MBA from The American University of Sharjah and is a member of Boards in a number of companies in Saudi, UAE, and the Middle East.