GBP’s rebound at the end of last week has proven short-lived, with GBPUSD breaking below 1.4200 this morning currently hovering around 1.4050, notes BNP Paribas.
"Any positive headlines for the GBP following UK PM Cameron’s deal were quickly pushed aside as London Mayor Boris Johnson announced he would support the leave campaign. The concern to the market will be that Johnson is able to provide a leader to an otherwise fragmented campaign for the UK to leave the EU. Therefore, the move increases the likelihood of opinion polls remaining closely balanced, leading to greater uncertainty, in turn suggesting that the GBP’s Brexit risk premia might persist. Opinion polls over the week ahead will provide insight into the public’s perception of all the new news and be pivotal to the GBP’s performance," BNPP adds.
"We continue to note, however, that the market’s extreme short positioning in the GBP (at a score of -41 out of -50 according to our positioning analysis) suggests that a squeeze in the GBP is likely to be larger than the scope for a further decline.
Furthermore, we note that BNP Paribas STEE signals shortterm fair value for GBPUSD is currently 1.4530," BNPP argues.
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