GBP/USD at risk of position adjustments - Westpac

GBP positions continue to build during the current sweet spot in Brexit negotiations and on the hope that trade agreements may be made at the Commonwealth Leaders’ Summit, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“However, the Commonwealth only accounts for 8% of UK exports to whereas EU accounts for 45% (basis ONS data). This week EU began to release plans to deal with consequences of a hard Brexit and UK options for the Irish border are due into May. If uncomfortable, Brexit concerns could be reignited given that “nothing is agreed until everything is agreed”.”

“Although employment and wage data remained solid, keeping prospects of a rate hike in May very live, soft inflation data should ease pressure on BoE to move from the current glacial path of policy change.”

“GBP/USD has recovered the bulk of its Brexit-vote fall but the slant of pressures suggest that GBP/USD is now at risk of position adjustments into May and potential retracements towards 1.4000.”