GBP ‘Increasingly Unloved’, Consider Long EUR/GBP Over Short GBP/USD – RBS

GBP is feeling increasingly unloved. Downside pressure has been building just above 1.30 in GBP/USD. This week’s break appears to have added to the negative sentiment as has a break up through 0.8635 in EUR/GBP. A break of 0.8676 would add to existing negative sentiment.

We believe the reality of Brexit is sinking in after a summer of less political sound-bites.

GBP has also stopped rallying on better data as the focus has turned to the longer term negatives. This week’s current account data (that accompany the final estimate of Q2 GDP) will remind investors of the challenges of financing a large deficit.

We see further trade weighted losses for GBP. Currently we have a slight bias to be long EUR/GBP over short GBP/USD.

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