Morgan Stanley Trade of the Week: Short GBPJPY

  • Short GBPJPY at market, target 175, stop at 187. With risk appetite declining and a range of risk events at year-end that could trigger higher FX volatility, we like to short GBP this week. The UK’s dependence on the financial sector makes the currency vulnerable to changes in risk appetite, as the Exhibit shows. Our economists are expecting an undershoot for wage growth data, which could support the trade. JPY should continue to benefit in times of risk off.

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