GBP: In search of a positive catalyst for further upside - ING

Viraj Patel at ING Bank, in its latest daily fx strategy reports, notes that the GBP/USD pair is awaiting some positive fundamental or political news in order to regain the key 1.4000 barrier.

Key Quotes:

“The pound is touching distance away from our long-held conviction call of 1.40 against the US dollar in 1Q18 – but even we're slightly surprised by the speed at which we have got there. Sure, most of it has to do with extensive $ weakness – which has evolved pretty much in line with our thinking.

But one can also detect a subtle shift in the directional sentiment for GBP – not least as the doomsday Brexit tail risks gradually fade (for good reasons, they will never fully disappear).

We do think there is more upside for GBP yet to come in 2018 – but for now, we will require a positive GBP-related catalyst to take us over the 1.40 line.

Here we continue to cite 2 non-mutually exclusive potential sources: (1) positive UK data surprises and (2) actual Brexit progress in the form of an agreed transition deal.

Today's UK retail sales figures will be noisy due to the distortive ‘Black Friday’ effects – so any fallout for GBP from a weak headline print may be short-lived. While resilience in the UK consumer is important – it is the investment side of the economy that has the greater scope to positively surprise to the upside in 2018 (via the theoretical lens of reduced uncertainty). We look for GBP/USD to consolidate within the 1.3850-1.3900 area – with outside risks of 1.40 today.”