TD Research discusses GBP outlook and keeps flagging near-term downside risks, noticing that GBP continues to lag the broader G10, as the soggy CPI data and some negative Brexit headlines have inspired some position squaring.
“We think this squeeze has some room to go, which reflects that positioning and valuation look stretched alongside further weakness in the data
What’s more, the market has felt comfortable about a BoE hike next month for quite some time, suggesting that the rate hike is priced into asset markets. Instead, we think a market in search of a theme will try to make one when offered some fodder like a data or policy event that alters sentiment. It offers room to fade well-populated long positions,” TD argues.