BNP: GBPUSD vulnerable to further downside : FXWW 

From the FXWW Chatroom

Our economists expect industrial and manufacturing production to be above expectations, but it is unlikely to be particularly bullish for GBP. GBPUSD remains vulnerable, in our view.
We initiated a short EURSEK recommendation via a 6-month put spread 9.45/9.20 for a cost of 0.63% (spot ref: 9.6220). For more details, please see here.
We published the August edition of our Corporate FX Monthly.

GBP will be in focus on Thursday with the release of June industrial and manufacturing production. Our economists believe there is a chance that these releases will surprise to the upside given the elevated level of confidence in the sector. However, GBP reaction should remain muted as the manufacturing sector only accounts for 10% of UK GDP. In our view, risks remain tilted to the downside for GBP, especially against the USD. We think the pricing for a BoE rate hike (currently a 25% probability by the end of the year) will continue to decline. Our economists believe the BoE growth outlook is too optimistic as they are skeptical manufacturing and investment can offset softer services and consumer spending growth.
Our BNPP FX Positioning Analysis signals that GBPUSD net long positions could be vulnerable. Our index has increased significantly, from -58 in mid-November (-/+100 scale) to +12 today (Chart 1). Our BNP Paribas short-term fair value model STEER™ also remains short GBPUSD, targeting 1.2834 (Chart 2). GBPUSD remains overvalued by a z-score of 0.70 against its short-term fundamentals.

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