GBP: Lacking a catalyst to break the negative psychology - ING

GBP is trading with a very negative psychology and at a disconnect with short-term financial variables, which may be justified given the string of domestic political and Brexit event risks over the next few months, according to analysts at ING.

Key Quotes

“However, any further idiosyncratic GBP selling could be seen as excessive now, with the current risk premium about right relative to the political risks at stake.”

“It is worth noting that evidence of any GBP-specific risk premium is less prevalent in GBP/USD given that we have two politically paralysed currencies offsetting each other. Still, we are in need of something to break the current bearish GBP mentality; uneventful Brexit talks and a light week for data, with only consumer confidence (Thursday) and manufacturing PMI (Friday) of interest, are unlikely to provide the positive catalyst that GBP seeks.”