G10: Short GBPUSD
Rationale: GBPUSD is becoming increasingly sensitive to data again; as the sharp reaction to last week’s PMIs demonstrated. Our economists now have greater conviction in their view that the UK is headed for a shallow recession, and they already expect Q2 GDP to surprise below consensus this Wednesday (see here). Additionally, next Thursday’s August Bank of England MPC meeting is also coming onto the radar. The majority of the market expects some form of easing to be announced. Finally, our technical analysts are also bearish GBPUSD on a one-week horizon (see here). The main risk to this trade would be if the Fed sounds particularly dovish this week, but we do not see strong incentives for it to do so. GBP is also less likely to outperform in G10 under such a scenario (see here).
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