GBP/USD has been trading in a wide, yet well-defined range. The pair is currently higher in the range. Will it fall from here? That is what the team at Credit Suisse sees.
Here is their view, courtesy of eFXnews:
Currency investors should consider GBP/USD this week, advises Credit Suisse in its weekly FX pick to clients.
“We expect BoE to marginally tweak down its dovish tone this week, which should give a brief lift to the pound.
We see little incentive for the MPC to be any more dovish than the market is already pricing in for the remainder of the year (around 7bp of cuts). In fact, at this point the BoE may now even want to avoid raising the market’s expectations for additional easing, given some of the glitches it has had with QE bond shortages and the uncertainty of whether it needs to save ammunition for a ‘hard-Brexit’. The MPC may take advantage of the stretch of recent data to paint a more balanced ‘wait-and-see’ message – perhaps by sounding encouraged by the pass-through of the recent rate cut or more concerned about the upside inflation risks.
While FX markets do not seem to be pricing in a particularly eventful or dovish MPC meeting, positioning remains highly short in GBP, and the pound has not hesitated to rally in response to local data and MPC guidance,”CS says as a rationale behind this call.
“The main risk to the trade is if the MPC takes a very dubious read of the last few data points – though we think the MPC would want to avoid draining away the recent stabilization in confidence,” CS adds.
As a technical-based trade, CS runs a limit order to sell GBP/USD at 1.3355 with a stop at 1.3376, and a target at 1.3165.
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