Forex Flash: Shorting EUR/GBP still a worthwhile avenue – UBS

FXstreet.com (Barcelona) - Many savers (both retail and institutional) across the Eurozone will be questioning whether it's still safe to keep funds within any Eurozone jurisdiction. According to Research Analyst Gareth Berry at UBS, “The next question to ask will probably be whether to keep any deposits in the euro as a currency at all. Given there is no direct FX impact in shifting euros across borders, we believe the second question is far more important.”

On a structural level, shorting EUR/GBP is still one of the largest positions in the market, especially led by asset manager selling. Looking at banking statistics from the Bank of England, we find that throughout the most 'stressed' periods of the Eurozone crisis in the last few years, there was a significant rise in deposit and other liability items in the UK's banking system.

However, the direction has since reversed, taking sterling down with it. Irrespective of changes in BoE policy or even downgrades up ahead, these indicators are worth tracking if investors wants to assess whether trust in the Eurozone's deposit framework has led to a loss of confidence in the currency itself.