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Jane Foley, senior FX strategist at Rabobank, suggests that GBP’s price drop yesterday afternoon extended a weaker trend that has been evident since the middle of March.

Key Quotes

“The recent move lower has undermined the technical picture for the pound and put a target of GBP/USD1.2773 in view (the February 2019 low).   It also suggests that the market is becoming increasingly weary of the Brexit process, the associated political wranglings in the UK and the damage that is being inflicted on the UK economy by the prolonged uncertainty.   That said the latest snapshot from the CFTC showed that last week speculators’ held long net GBP positions for the first time since last June.”

“We see a strong risk that this will be reversed in the next set of data and, in the absence of developments that increase the chances of a Brexit deal being passed by the UK parliament we see risk of GBP remaining on the back foot.”

“In the absence of news which suggests that a Brexit deal may soon pass through parliament, we expect GBP to remain out of favour in the weeks ahead. Further out we expect a Brexit deal to bring relief but see GBP as struggling to push pass GBP/USD1.31 on a 6 month view.”