The UK is officially leaving the European Union. So far, we have only seen some wobbles. The team at Bank of America Merrill Lynch draws the movements going forward.
Here is their view, courtesy of eFXnews:
Bank of America Merrill Lynch FX Strategy Research notes that the initial reaction to the triggering of A50 has been relatively muted.
In this regard, BofAML strongly disagrees with the argument that the formal triggering of A50 triggering has somehow removed uncertainty, arguing that with the clock now ticking on the 2-year deadline and the EU seemingly in little rush to sit around the negotiation table, this void of concrete negotiating principles does not sit well for GBP which continues to rely on capital inflows to finance its current account deficit.
As such, BofAMl continues to believe that GBP/USD is likely to trade back towards the bottom end and test the $1.20 trading range, but makes the case that this post A50 dip in GBP would providing a buying opportunity.
“Whilst our bias remains for renewed GBP weakness at the higher end of the 1Q17 technical range, we are cognisant of the ongoing positioning unwind positive April seasonal factors which has seen GBP rally every month over the past twelve years and an unconfirmed technical base in GBP/USD,” BofAML adds.
GBP/USD is trading circa 1.2530 as of writing.
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