Short GBP positioning is still extreme – Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the UK high Court rulings on whether UK’s Govt. can invoke article 50 (Brexit) may delay (if appealed, Supreme Court hearings should complete by year end) rather than alter Brexit.

Key Quotes

“The market should be influenced more by negotiations, but these may well become more opaque in the near term and so depress GBP.

Short GBP positioning is still extreme and risk of squeezes remains. The shift in yields spreads may alter optics, but the driver of the rise in UK yields is the prospect of fiscal loosening, not dropping QE. MPC’s easing bias should remain despite recent sounder than expected data. GBP weakness should persist into the Autumn Statement (23 Nov.) and any squeezes are likely to be limited.

The 1.18-1.20 will attract GBP/USD, but should also provide support, unless Brexit negotiations become “hard”-er.”