GBP: Further Downside Near-Term; What’s The Trade? – BofAML

Brexit talks have begun with the UK caving into the EU demand that talks begin around the divorce agreement, then about a new trade deal. What´s next for the pound?

Here is their view, courtesy of eFXnews:

Bank of America Merrill Lynch FX Strategy Research notes that GBP has been unable to maintain its initial gains after last week’s hawkish BoE outcome.

“In ordinary circumstances, GBP may have reacted in a more sustained, positive, manner (in a similar fashion to CAD and CAD rates following the recent guidance shift by the Bank of Canada) to such a shift in MPC voting patterns.

But these are not ordinary times and we are not surprised to see GBP paring back some of its initial gains against the backdrop of so much political uncertainty domestically,” BofAML argues.

As a result, BofAML sees further near-term GBP downside and keeps recommending playing that via long EUR/GBP exposure.

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