Pound/dollar retreated from the highs as the Bank of England was relatively dovish, expecting little from the economy despite assumptions for a smooth Brexit. What’s next? Here are two opinions:
Here is their view, courtesy of eFXnews:
GBP: 3 Reasons To Stay M/T Bullish For 1.37; What’s The Trade? – Nomura
Nomura FX Strategy Research maintains its positive view on GBP in the medium term on the back of the following three reasons:
“1) the inflation premium in GBP looked overstretched; 2) the BoE will become less pessimistic owing to better global growth and 3) the difficulties of the early stages of Brexit look to be priced in already,” Nomura argues.
Meanwhile, when it comes to Brexit, Nomura shares the BoE’s view of an orderly transition period and highlights that the next risk event will be the 8 June general election which should result in a strong majority for the conservatives in the House of Commons.
Altogether, Nomura remains constructive on GBP expecting GBP/USD to test 1.37 by year-end, and maintains its recommendation for a long position against a basket of USD, EUR and AUD through out the second half of the year.
GBP/USD is trading circa as 1.2858, EUR/GBP circa 0.8480 and GBP/AUD circa 1.4730.
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GBP: Failing To Live Up To The Hype: What’s The Trade? – BofAML
Bank of America FX Strategy Research notes that GBP has been broadly lower in the aftermath of the BoE decision with some of the main pairs having failed to break through resistance in recent weeks.
Looking ahead, with a key event risk now out of the way, the focus for FX markets shifts to UK data-watching with CPI and retail sales both released next week.
“UK data surprises continue to mean-revert downwards. With positioning now much cleaner than has been in recent weeks, the risks to GBP are more symmetric,” BofAML adds.
“Heading into a busy schedule for data which is showing further signs of weakness and the June 8th General Elections, we believe that GBP faces near-term headwinds and our bias would be to sell on rallies in the coming weeks,” BofAML recommends.
GBP/USD is trading circa 1.2875 as of writing.
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