GBP: Ready to break, but which way? – RBC CM

According to Adam Cole, Research Analyst at RBC Capital Markets, after two legs of independent weakness post-referendum, GBP has become a dull range-trade for the last three months.

Key Quotes

“Going forward, another leg of GBP weakness still seems the most likely resolution of the current range trading regime.”

“Persistently positive data surprises and rising growth expectations will eventually sow the seeds of their own demise and expectations will overshoot to the upside.”

“Recent trade data are consistent with the failure of export volumes to respond to GBP weakness, which will become an important theme in the UK as it has in Canada.”

“Several temporary supports for GBP also look more fragile going forward. We are maintaining our targets for the lows against USD and EUR (1.15 for GBP/USD; 0.89 for EUR/GBP), though pushing forward the timing.”