UK: After 5.3% drop against the US dollar in 2015, what’s up for GBP in 2016 – BBH

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 4, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Delhi) – Research Team at BBH, suggests that expectations for a BOE rate hiked have are into H2 16, and an economy that appears to be losing some momentum have weighed on sterling.

    Key Quotes

    “The US-UK 2-year spread favored the former by a nine-year high 46 bp in the last week of the year.”

    “The UK budget deficit is overshooting, and the first budget of the Tory's majority government was somewhat less austere than many anticipated, given the rhetoric. This, coupled with an easy BOE stance, is not a policy mix often associated with a stronger currency.”

    “Sterling finished last week at its lowest level since April, falling two cents in four sessions. It is unlikely to fall another two cents in the next four sessions, but that appears to be the direction. A move above $1.4880 would suggest instead that a correction is at hand.”

    “Sterling hit a low near $1.4565 in April and then made a spectacular recovery in two months to reach $1.5930. However, it is has been trending lower since, and there is nothing in the technical condition that suggest sterling's has neared a significant bottom. A test on the April lows seems likely, and a break could spur another 2% decline to bring it to the 2010 low near $1.4230.”

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