Continues to advocate GBP shorts - Westpac

Research Team at Westpac, suggests that their process continues to advocate GBP shorts, albeit only on any countertrend strength with 2 bearish signals among 3 rather than a complete trifecta. 

Key Quotes

“We lower our sell entry point to 1.3295, stop at 1.3430. A materially weaker GBP will play a crucial role in rebalancing the economy and cushioning it against a likely meaningful recession.

The BoE is more likely than not to cut rates and kickstart QE at their Aug 4 meeting too. But, whereas some are talking up GBP targets near parity we have a more modest 1.20-1.25 target. The 1992 ERM and 2007/08 analogues are inappropriate given GBP fell from heavily overvalued levels near 2.0 in these cases.

At 1.50 going into the referendum GBP was already close to PPP fair value and the relatively strong link between the UK’s external accounts and her exchange rate suggests an outsized depreciation is not an absolute necessity.”