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NOT MUCH POLITICAL RISK PRICED INTO THE POUND, YET

There's a lot of political noise in Britain, but until last Thursday, you wouldn't have known at all from looking at sterling, which has been trading pretty much in line with fundamentals against the euro

The pound did weaken on the euro late on Thursday, after a possible route back into parliament appeared to emerge for Greater Manchester Mayor Andy Burnham, but even with that, there's not much to see in the currency.

Goldman reckon euro/sterling, last at 0.8708, is about 1% above where they think it should be based on cyclical fundamentals. EURGBP=D3

Interestingly, that's actually less than most of last year where it regularly traded 2% above.

And Goldman think that 2% premium is "a reasonable near term target" for the pair, especially as some of the positive factors for the pound including a sharp rebound in global risk sentiment, look like they could be spent.

But while Goldman see room for the pound to weaken more against the euro, they think there's more value in betting on sterling downside versus the Australian dollar or U.S. dollar.

(Alun John)

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EARLIER ON LIVE MARKETS:

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EUROPE BEFORE THE BELL: SEEING RED CLICK HERE

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