This is a new recommendation from the French bank BNP Paribas:
- We re-enter long GBP exposure via a GBPCHF buy recommendation.
- Upward revisions to UK GDP highlight UK economic outperformance.
- BoE rate expectations are too conservative while GBP positioning is flat.
- We recommend buying GBPCHF at 1.5489 targeting a move to 1.62 with a stop loss placed at 1.5250.
We believe the CHF an attractive funding currency to buy GBP. EURCHF has
fallen and is trading just 0.5% above the Swiss National Bank’s (SNB) 1.20 floor.
The SNB clearly signalled its commitment to the floor at the last policy meeting in
September and stated that it was prepared to act further if necessary. While
additional policy easing is not our base-case scenario, the risk-reward favours
short CHF exposure. GBPCHF longs also benefit from positive carry. From a
broader capital flow perspective, the latest Swiss balance of payments data points
to an increase in long-term capital outflows.