GBP/USD: sell the rallies to 1.32 – Westpac

Tim Riddell, Macro Strategist at Westpac, has recommended selling Cable on upticks towards the 1.3200 handle.

Key Quotes

“Speculative positioning is understandably extremely short GBP but this does open the risk of profit taking squeezes”.

“Nevertheless, GBP rebounds are likely to be short-lived given the BoE’s extremely accommodative stance. The successful second round of gilt purchases under its renewed APP perversely added to a near term squeeze in GBP but further regular auctions should underscore the BoE’s intention to drive rates lower and maintain downside pressure on GBP”.

“Activity and housing surveys for August into the end of the month will likely be of greater interest than 2Q GDP and any sign of deterioration in such data could prompt yet further BoE action”.

“Position squeezes in GBP/USD should provide selling opportunities in front of 1.3200 with the initial post Brexit low of 1.2800 remaining a strong attraction, along with measured move targets around the psychological level of 1.2500”.