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- We are negative on the UK economy going forward although it did well in H2 last year. How to trade GBP/USD - SEB
We are negative on the UK economy going forward although it did well in H2 last year. How to trade GBP/USD - SEB
"We are negative on the UK economy going forward although it did well in H2 last year. In particular household and capital spending seem vulnerable from the impact of growing political uncertainty created by the upcoming divorce from the EU. Retail sales have already showed signs of slowing and will likely continue to do so.
However, these reasons for GBP weakness are currently overshadowed by political risks elsewhere, which have caused a small recovery of the GBP. We argue this recovery is just temporary and is unlikely to last.
Nevertheless, the net short exposure to GBP is still much larger than it has been historically. Consequently, sterling may well continue to recover in coming weeks as long as market players focus elsewhere. Not so much because things have improved in any particular way in the UK but more because political uncertainty and risks have increased elsewhere. This might well continue until the second round of the French presidential elections in May.
However, EUR/GBP around 0.83 would represent a compelling buy with a target closer to 0.90. Alternatively we suggest selling GBP/SEK around 11.50-11.70 for the currency pair to reach levels below 10.50 in the second half of this year".
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