GBP During the Campaign Period - Nomura
Research Team at Nomura, suggests that currently, bookmakers’ odds imply the probability of Brexit is around 33%.
“If this were to increase to 50-50, our beta study would imply the reaction in GBP/USD would be about a -3% move, which would put GBP/USD at 1.37 from current levels. Markets have demonstrated their non-linear nature before though, and at that 50-50 level of implied probability of a Brexit, we would not be surprised if GBP’s depreciation accelerates further.
We will keep our GBP short position here, but are not looking to add at current levels, unless there is a short-term positioning squeeze higher, or opinion polls show a clearer shift in favour of Brexit. Another squeeze is possible in our view, and we keep judging the 1.44-1.45 level as a good level to add GBP short positions ahead of the referendum date. Please find the full piece here.
We also revised our forecast for commodity currencies this week, finding that AUD, CAD and NZD are all slightly overvalued given current levels of commodity prices and the rates differential. As such, we believe these currencies should depreciate this year.
However, we believe these currencies are likely to depreciate slightly less than previously expected, with USD/CAD ending the year around 1.35, AUD/USD at about 0.67 and NZD/USD close to 0.62.”
(Market News Provided by FXstreet)