Nomura Still Sees Favorable Risk-Reward on Being Long Sterling
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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UUID: 7947283
(Bloomberg) -- Nomura continues to view the risk/reward of being long-GBP as favorable, given that real yields are likely to head higher, strategists write in a note to clients.
- Given the question marks over whether this leads to a soft Brexit, potential GBP downside from here may be limited
- On sterling, the market may simply say that we were trading at 1.25 before this election and that is where we belong, but it isn’t so simple
- A smaller majority could lead to a more open dialog as to the direction and task at hand of Brexit or Theresa May could step down and be replaced by a less “hard-Brexit” figure
- In either scenario, GBP volatility is the winner, as the direction over coming weeks is still very uncertain
- It may be that non- residents will look to sell gilts or at least stop buying and there must be some frustration building with the continuing political uncertainty in the country
- In contrast, it may also be that residents flee to the safety of gilts
- It is hard to call “a winner" of these two opposing forces
- Flight-to-safety force wins out in the short run (days), while the non-resident buying and soft-Brexit hope forces win in the longer run (weeks)
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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To modify this alert, click here
UUID: 7947283