Nomura FX Strategy Research expects GBP to trade heavily in the near-term following last week’s BoE meeting.
“We do not expect next week’s labour market and CPI data to change the narrative, and see a risk of investors wanting to be long euros switching out of short USDs into short GBP.
Furthermore, we argue relative output gaps are likely to swing further in the euro area’s favour, suggesting scope for further upside in EUR-GBP rates differentials in the medium term, which should push EUR/GBP higher,” Nomura argues.
Nomura recommends expressing GBP shorts against the EUR and has entered a long EUR/GBP positions through a 0.92/0.94 call spread expiring 31 October.
Source: Nomura Securities Research
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