GBP: Potential to be a relative outperformer – ING

In view of Viraj Patel, Research Analyst at ING, short GBP positions have been the recurring pain trade in FX markets and they believe this will continue to be the case, not least after recent developments on the state of Brexit negotiations and the outlook for UK monetary policy.

Key Quotes

“On the latter, comments by BoE policymaker Vlieghe that we may see one or two rate hikes a year in this tightening cycle – the first real indication by a BoE official on the annual pace of policy normalisation – gave implicit support to the currently steeper UK rate curve and should help GBP stay at these elevated levels under the status quo.”

“Limited trade war escalation this week and a stabilisation in the equity market sell-off may see GBP/USD push higher towards the 1.4250-1.4300 post-Brexit highs. Indeed, we see GBP as a relative G10 outperformer in the near term amid a positive re-appraisal of short-term UK economic and political risks.”