ING Research discusses GBP outlook and maintains a cautious bias into year-end.
“The only thing going for sterling is buy-side positioning.
Being short the pound had been one of the most popular buy-side trades
going into October. We have seen what positioning has done to crowded
long dollar trades over the last week. It is hard to see what sterling
positives the market could take from today’s budget – but there is an
outside risk that investors have some residual sterling shorts to cover.
The outside risk near term is a very painful sterling short-squeeze
taking GBP/USD to 1.23. However, that squeeze should not last long,” ING notes.
“Overall, we expect
GBP/USD to be unable to hold any gains above 1.20 and would prefer sub
1.15 levels before year-end. Equally, EUR/GBP should find support near
0.86/87,” ING adds.
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