Where to target in cable
BTMU FX Strategy Research notes that the GBP has started the week on firmer footing reflecting both a reduction in near-term political risk and building expectations of BoE monetary tightening.
"The announcement yesterday from the ONS that it had materially underreported unit labour costs has reinforced expectations that the BoE will begin to gradually raise interest rates at their next policy meeting in November.
....We have currently penciled the first hike in November, and it would appear reasonable at the current juncture to expect another one or two hikes in the year following the first hike assuming that the UK is able to secure a transitional agreement with the EU for around two years. The UK government has clearly signaled that it desires a transitional deal but as Prime Minister Theresa May signaled yesterday it is also crucially important to prepare for a no deal scenario if the EU is not willing to reciprocate.
Overall, we continue to see scope for the pound to strengthen if a transitional deal is agreed in a timely manner in the year ahead," BTMU argues.
BTMU targets GBP/USD at 1.3560 by end of year and at 1.3950 by end of Q1 2018.
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