Short GBPUSD as BoE pricing could unwind - BNPP

Analysts at BNP Paribas has initiated a short GBPUSD recommendation at 1.2890, targeting 1.25 as pricing for a BoE rate hike is vulnerable while BoE deputy governors Haldane and Broadbent will speak today and their comments will be keenly watched.

Key Quotes

“BoE deputy governor Broadbent (12 am Ldn) and chief economist Haldane (10am Ldn) will be speaking on Tuesday. Haldane has been quite hawkish recently and the market is already pricing in a 65% chance of a rate hike by the yearend, which means the GBP should be relatively immune to hawkish comments from him. We think pricing for a BoE rate hike is vulnerable to an unwind as the hawkish message remains very dependent on growth holding up and we expect growth indicators to signal a slow down. Later this week, any downside surprise in UK wages could weigh on GBP.” 

“Our STEER™ model signals that GBPUSD could be sensitive to a widening of the front-end yield differential. If UK-US 2y yields widen by 20bp, GBPUSD short-term fair value would fall to 1.2466. Our BNP Paribas FX Positioning Analysis also signals that short GBP positioning remains light versus recent history whilst USD short positioning is the largest in G10. We initiated a new short GBPUSD recommendation Monday at 1.2890, targeting 1.25 and with a stop at 1.3060.”