GBP: Scope For Sizeable Appreciation Once Risk Premium Priced Out; Staying Structurally Bullish – BofAML

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The pound continues its recovery path as hopes for a soft Brexit or no Brexit at all prevail. What’s next?

Here is their view, courtesy of eFXdata:

Bank of America Merrill Lynch Research discusses GBP outlook in light of the recent Brexit development.

“In the coming days, the PM will report back to parliament on the next steps in the process, but it is clear from the scale of the defeat that minor tweaks to the Political Declaration will not suffice, particularly as the EU have stated they are unwilling to reopen the EU Withdrawal Agreement.

The government still has options, but in our view, the most likely scenario in the coming weeks is an extension of Article 50. Furthermore, the PMs suggestion of a cross-party approach to a solution suggests all paths lead to a soft Brexit, our long stated position…While some have suggested that an extension of A50 merely prolongs the uncertainty hanging over the UK, we would argue that extension of A50 will be a bullish signal for GBP,” BofAML argues.

Scope for sizeable GBP appreciation once political risk premium priced out. Investors see GBP as significantly undervalued…We maintain our structural GBP bullish call,” BofAML adds. 

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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