FXStreet (Mumbai) – Research Analysts, Global FX Strategy, Nomura reviewed GBP performance over the past week and suggest this GBP weakness as an opportunity to go long GBP against low-yielding European G10 FX.
Key Quotes:
“Position unwinding owing to concerns about a Chinese stock market collapse and Greek risk meant GBP performed weakly this week. We view this GBP weakness as an opportunity to go long GBP against low-yielding European G10 FX, as the UK economy’s stronger macro fundamentals are unlikely to change.”
For GBP/CHF, “Once uncertainty surrounding Greece has abated, divergence in monetary policy among the European G10 economies should become clearer, including divergence between the UK and Switzerland.“ While, “The investment flow picture suggests more GBP/CHF upside risk.”
“Interestingly, the risk aversion observed this week has had a fairly mild impact on yields, suggesting that global fixed income dynamics are turning. As a low-yielding currency, CHF depreciation pressures will likely increase as yields rise globally, which will be the most positive for GBP/CHF among the European G10 FX pair gradually.”
“Specifically, we enter a GBP/CHF long position in cash at 1.451, with a stop at 1.420 and we spend $10mn within our $100mn spot portfolio.”
(Market News Provided by FXstreet)