GBP: We still like the pound! - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that a Trump presidency is good for the UK and as they expected, the EUR/GBP rate continues to correct sharply lower.

Key Quotes

“IMM leveraged speculative short GBP positions remain close to record highs, so we can easily see further pound upside over the short-term. Theresa May had her first telephone conversation with President-elect Trump yesterday with the UK media reporting the conversation went well despite being well down the list of leaders to call (she was ninth on the list supposedly!). He apparently emphasised the importance of the UK/US relationship. There are also media reports suggesting an important role Nigel Farage may play in the future relationship as the UK attempts to build a rapport with the Trump administration with an eye on an eventual trade deal post official departure from the EU. Farage’s strong relationship with Trump could act as a plus in trade negotiations.”

“Brexit and “Brexit-plus-plus-plus” as Trump said of his victory during campaigning will only reinforce the perception in the financial markets of a closer UK-US relationship under a Trump presidency. One consequence of that could be the pound and dollar being viewed more similarly which would result in the EUR/USD becoming more correlated with EUR/GBP rather than EUR/USD – something that has been in evidence in recent days.”