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GBP/USD shot higher, topping 1.36, on the BOE’s bullish stance. It then dropped on political uncertainty regarding May’s future and Brexit talks. What’s next?

Here is their view, courtesy of eFXnews:

Nomura FX Strategy Research notes that the GBP has underperformed in the G10 space this week as negative headlines from the Conservative Party conference, where a troubled speech from Prime Minister Theresa has led to concerns about her potential resignation and a Conservative leadership election.

“If we see headlines of Theresa May’s resignation, we’d expect the pound to suffer and quickly.

Nonetheless, if Tory rebels look to the long game, we think it’s too early to push for that resignation and we’ll go back to trading the BoE  and upcoming EU negotiations, both of which may present upside surprises versus low market expectations,” Nomura argues.

Nomura prefers tactically short EUR/GBP into the BoE’s November inflation report.

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