Sell GBP to USD Pair Ahead of Bank of England Meeting: ING
- Written by: Gary Howes
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The big event for sterling this week is the Bank of England’s Super Thursday event. This is a chance to profit on sterling’s fall say ING. Strategist Viraj Patel writes:
The initial shift in global risk sentiment in recent months (from bearish to tentatively neutral) has been a positive driver for GBP, accounting for more than half of last month’s recovery.
But signs of a stabilisation in risk appetite (as opposed to new found optimism) means that this risk impulse is beginning to fade.
Instead, the focus is shifting back to the upcoming EU referendum (23 Jun), with the respective campaigns picking up this week following the end of local UK elections.
While betting market odds for a Brexit have been nudging higher (currently around 30%), they still remain some way off what opinion polls are showing (the Bloomberg composite poll tracker puts the outcome in the balance).
We suspect that betting market odds will slowly converge towards polls.
Look to sell GBP/USD ahead of the BoE meeting, with a dovish confirmation likely to see some pent-up GBP weakness emerge.
Short GBP/USD would be the preferred vehicle to express a bearish GBP view were US yields start to pick up on the back of solid US data. We continue to expect a move below 1.40 ahead of the referendum (23 Jun).