Tactical short EUR/GBP post ECB – Nomura

By FXStreet FXStreet (Delhi) – Research Team at Nomura, suggests that the current levels make a tactical short EUR/GBP position attractive, coupled with the ECB reminding us that it can still act, which will likely provide a catalyst for a correction lower.

Key Quotes

“The year 2016 has seen GBP fall to fresh lows driven primarily by three forces: (1) the ensuing risk-off environment with GBP trading in line with risk proxies as of late; (2) the further delay of BoE hiking expectations (to the point where “liftoff” pricing is close to non-existent); and (3) the pre-emptive hedging that has taken place in advance of the announcement of the EU “Brexit” referendum date.

These three drivers could continue to prove a drag, but the price action in 2016 thus far appears excessive, in our view.

The final question remains as to the possible reaction of GBP once the date for the EU Brexit referendum is announced. We expect a deal to be reached between leaders at the 18-19 February EU summit, a few days after which we could see a proposed date for the EU Brexit referendum. However, whatever proposed date is announced would not be guaranteed, as it still has to pass …read more

Source:: FX Street