The yield curve remains an important driver of GBP/USD – Morgan Stanley

In its latest GBP/USD analysis, Morgan Stanley (MS) sounds cautiously optimistic with its eyes on the yields.

Key quotes

We stay neutral on GBP/USD but see risks now skewed to the upside. Good economic data, which would drive real yields higher, is a necessary condition for turning outright bullish.

The yield curve remains an important driver of GBP/USD and how the yield curve steepens or flattens and where we are in the business cycle will matter for the currency.

FX implications

GBP/USD remains sidelined following a bounce off the yearly low, around 1.3410 during early Monday morning in Asia. Given the Brexit woes and the Fed rate hike chatters, the cable bulls remain weak of late.

Read: GBP/USD struggles to defend 1.3400 on Brexit fears, sluggish markets