Nomura FX Strategy Research maintains its positive view on GBP in the medium term on the back of the following three reasons:
"1) the inflation premium in GBP looked overstretched; 2) the BoE will become less pessimistic owing to better global growth and 3) the difficulties of the early stages of Brexit look to be priced in already," Nomura argues.
Meanwhile, when it comes to Brexit, Nomura shares the BoE's view of an orderly transition period and highlights that the next risk event will be the 8 June general election which should result in a strong majority for the conservatives in the House of Commons.
Altogether, Nomura remains constructive on GBP expecting GBP/USD to test 1.37 by year-end, and maintains its recommendation for a long position against a basket of USD, EUR and AUD through out the second half of the year.
GBP/USD is trading circa as 1.2858, EUR/GBP circa 0.8480 and GBP/AUD circa 1.4730.
Source: Nomura Securities ResearchOriginal Article
