GBP on a shaky ground – RBC CM

Adam Cole, Research Analyst at RBC Capital Markets, notes that ostensibly triggered by harsh comments on UK exit terms from French PM Hollande, GBP collapsed around the Asian open, with trades apparently going through below 1.15.

Key Quotes

“The move happened right at the point of thinnest liquidity and on a day (payrolls Friday) when volumes would have been unusually thin anyway. Spot currently stands around 1.2440, still 150pts down from the NY close. The nature of the flows that pushed GBP to the lows may not be clear for some time and for now we are not changing our forecasts, which are already well below consensus (1.25 end-year, 1.15 early next year).

Spill-over into broader markets has been quite limited, but the tone is moderately risk-off (USD/JPY -40pts, AUD/USD -20pts).”