Prospect of further BoE expansion will cap GBP - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that short positioning in GBP is understandable given the scale of the BoE’s multi-pronged easing.

Key Quotes

“Auctions for the Bank’s gilt purchases have gone well so far. The prospect of further expansion will cap GBP, the weakening of which is actually a part of the overall post-Brexit easing.

Nevertheless, recent data suggest that the immediate impacts of the Brexit vote have been mild. The British Bankers Association lending report may have shown that the number of mortgages fell, but it also stated that consumer credit has rebounded and “businesses also appear to be borrowing as usual.”

Squeezes should be seen as selling opportunities, but they could force a test of the 1.34s before sliding once more to the post-Brexit low of 1.2800, if not the measured move and psychological level of 1.2500.”