GBP downside exhausted? – BTMU

Derek Halpenny, European Head of GMR at BTMU, has not ruled out a potential rebound in the British pound following the ongoing consolidation.

Key Quotes

“More good news for the pound and once again in the current dire sentiment driven market, the pound has failed to respond. The NIESR yesterday announced updates to its real GDP projections with upgrades for growth since its last estimate in August”.

“The NIESR now estimates growth at 2.0% this year and 1.4% next year”.

“The BoE uses a similar forecasting model to the NIESR and hence we can assume roughly similar increases in growth projections from the BoE tomorrow when it releases updated forecasts in the Quarterly Inflation Report. We agree with the

NIESR that the BoE will not have to ease monetary policy again as it looks through the temporary spike in inflation due to pound depreciation”.

“We continue to believe that the scale of pound depreciation has over-extended and the longer we stabilise around current levels the greater the risk becomes that we will see a liquidation of short GBP speculative positions and a recover of the pound against both the dollar and the euro”.