GBP: Market already pricing in worst case scenario - BNPP

Research Team at BNP Paribas, continues to see scope for the GBP to bounce on positive news surprises given extreme short positioning and very cheap GBP valuations.

Key Quotes

“Our BNP Paribas STEER™ model remains long GBPUSD and short EURGBP, while our CLEER model suggests the currency market is now pricing a worst case scenario for capital flows in the coming year. Our BNP Paribas positioning framework suggests short positioning in GBP is getting increasingly stretched. However, as we have noted, we are heading into crunch time for the GBP as the various parties stake out negotiating positions, so we would expect news flow to remain rather challenging in the near-term.

Ahead Friday, BoE Governor Carney and his Deputy Governors will be attending a series of public events in central England aimed at examining how the central bank can better serve society.”