GBP/USD is likely to falter near 1.26 - Westpac

Tim Riddell, Research Analyst at Westpac, views that solid retail activity, confidence and better than expected data releases have seen a reduction in speculative shorts and a sound rebound in GBP on a trade weighted basis.

Key Quotes

“However, this reflects an effective “phoney war” period between the Brexit vote and Brexit negotiations.”

“The very cautious Autumn Statement and OBR’s forecasts of milder economic pullbacks also assisted. However, the recent stance of EU/EC presidents and ECB’s Draghi with respect to harder negotiations coupled with less optimistic growth forecasts from the OECD and BoE’s Financial Stability Review concerns over the scale of UK’s current account deficit should weigh on GBP.”

“Carney and Vlieghe repeated the BoE’s stance and the likelihood of increased uncertainty to 2017. The Supreme Court Appeal may fuse such risks for markets. GBP/USD is likely to falter near 1.26 before retesting its apparent base in the low 1.20’s as Brexit concerns resurface.”