GBP: A Perfect Storm Is Coming; Short GBP/CHF Preferred Expression – BofA

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What is the outlook for GBP through year-end?

Here is their view, courtesy of eFXdata:

Bank of America Global Research maintains a bearish GBP bias through year-end, and likes to express that via short GBP/CHF (1.1830/1.14 GBP/CHF put spread in 1×2).

We remain bearish GBP. 3Q/4Q a perfect storm. Seasonality to work against GBP into year-end. Weaker GBP against backdrop of high policy uncertainty. We make the case for lower GBP/CHF,” BofA notes. 

“Aug-Dec historically contain four negative months for GBP performance. But while the global backdrop will provide the day-to-day narrative for G10 FX more broadly, the poundfortunes will increasingly be driven by the monetary policy stance, the ability of the economy to rebound from the global pandemic, and Brexit negotiations, which are effectively stuck in the mud. These form the pillars of our structurally bearish view and we take this opportunity to flag GBP/CHF as the preferred expression of that view,” BofA adds. 

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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