GBP: Market is still heavily short – Westpac

Research Team at Westpac, suggests that the ears of a post-Brexit confidence shock have been assuaged by solid retailing and survey releases, but the real effect of the vote are still to become apparent on the UK economy. 

Key Quotes

“Although the market is still heavily short GBP, rebounds have been minimal due in no small part to the enormity of BoE's easing programme, which effectively includes GBP weakness. The greater risk for GBP appears to be deeper declines if activity data show any weakness from the Brexit-vote.

Technical: A tightening (wedge) range is forming off 1.28. Even if a squeeze through 1.3275 can develop, it would be seen as corrective and likely to falter around1.3480. Technical bias remains to sell into rebounds and a close below 1.3025 should trigger a retest of 1.28 if not measured targets around 1.2450-1.2500.”