Both USD/CAD and GBP/USD trade at similar levels. But their directions may be different. The loonie enjoyed the recent OPEC agreement and the pound suffers from the Hard Brexit talk. What’s next? Here is the view from BNP Paribas:
Here is their view, courtesy of eFXnews:
Crude prices are holding onto gains from late Wednesday, setting a risk-on tone across markets, as OPEC ministers have signalled a likely production cut at their next official meeting on 30 November…USDCAD failed to sustain a break of its 200-day moving average on the topside for a second day in a row Wednesday and retreated below 1.31 as oil prices gained. We think USD vulnerability is likely to see USDCAD trade down towards 1.30 in the near-term.
We think GBP is likely to weaken over the coming weeks. Our short-term fair value model BNP Paribas STEER continues to highlight that the currency actually looks expensive versus rates and equities. Short-term fair value for Cable is below 1.29 at 1.2887 and for EURGBP it stands at 0.8695. Market expectations for Bank of England easing continues to look too conservative in our view, with our 5bp of rates cuts priced for the November meeting versus our economists’ expectations for a 15bp cut.
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