GBP/USD is more bullish, unlikely to fall below 1.30 - SocGen
Strategy from Societe General
Societe Generale Research discusses GBP/USD outlook and adopts a more bullish view in light of the latest Brexit developments.
"The rejection of a no-deal by the UK Parliament and the successful motion to postpone Brexit are likely reshaping the balance of risks for the pound, and in a positive way. The pressure on the currency will undoubtedly be lighter if an ordered Brexit takes shape.
The protracted political deadlock provided the FX market with substantial time to digest and discount darker UK fundamental indicators. As a conclusive deal remains to be seen, the two tail risks remain a no-deal Brexit (negative) and no Brexit at all (very positive). The former is much less likely, while the latter remains a small possibility in an overly open situation," SocGen notes.
"With cable butterflies collapsing to pre-June 2016 Brexit vote
levels, while volatility remains higher, it is fair to say that the
options market is maintaining a political premium, but that the
associated tail risks have been ruled out. With the downwards
force of gravity reduced, GBP/USD is unlikely to fall below 1.30, and
instead feel a certain weightlessness as the overvalued US dollar
eventually weakens," SocGen adds.
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