Sterling trades like no other currency. The market loves to hate it, loves to sell it, then occasionally gets caught short and we see nasty clean-out rallies.
I’m long and I’m biased. I’m long because I think the GBP is heavily undervalued against the JPY in particular but also against the EUR. The market is in a long-term USD-selling mode so I’m comfortable trading this sterling view in the cable. If the market gets caught short sterling across the board and has to cover quickly, we’ll see a 10 big figure move very quickly.
It’s difficult to advise going long cable at 1.63, which is at the upper end of recent trading ranges, but I think anyone trying to fade the rally should also be very careful. If we break clearly above 1.6400 then the clean-out could well begin in earnest.
