GBP: Positioning Still Extreme; Get Ready For A Big Squeeze - BNPP

BNP Paribas expect the Bank of England to leave policy unchanged this week with a 9-0 vote, as softer data, fiscal tightening, a challenging global environment, and referendum uncertainty keep even the hawkish members of the Committee at bay.

"We expect labour market data this week to show further slowing in employment growth on a 3m basis, with the jobless rate steady at 5.1% and average earnings slightly firmer at 2.1% (3m/y).

EURGBP is holding not far from our June 2016 forecast target of 0.77, but we continue to see scope for the cross to move substantially lower in the second half of the year.

Moreover, with short GBP positioning still extreme according to our BNPP Positioning Analysis, the GBP could appreciate significantly if macro news improve," BNPP argues.

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