GBP will be one to watch over the coming days and weeks - TDS

Analysts at TDS suggests that the GBP will be one to watch over the coming days and weeks, with the currency likely to start trading more closely with election polls, and the anticipated size of the Conservative majority in the upcoming UK elections.

Key Quotes

 “The call for a snap election in Britain has seen cable rally to fresh highs. The snap elections generate some short-term noise, but the consolidation of power in Britain could offer a clearer mandate in the Brexit negotiations. The constructive news has seen GBPUSD mark a new daily high, and trade through its 200-day MA (1.2624) for the first time since Brexit.”

“While we had forecast GBPUSD hitting 1.29 by the end of Q3, the surprise election announcement raises the risk that we see those higher levels sooner.  The USD side also looks supportive for further gains in cable, which reflects softer US data surprises, a longer timeline for fiscal reform and a shift in Fed pricing. Indeed, with the greenback tracking fairly close to rate spreads, it remains vulnerable to a deeper correction alongside a turn in US data surprises.”    

“Our positioning and valuation models point to further downside in AUD and NZD, which could favor more upside in GBP against the antipodeans. The break of some key technical levels in GBPAUD suggests momentum trades could start to accelerate the move higher with a break of 1.69 suggesting a test of 1.7250.”