Bookmakers reacted to the intervention of President Obama in the UK’s EU referendum debate by lengthening the odds of a ‘leave’ vote. Politically-inspired sterling shorts are being squeezed as a result, but the news that a major High Street retailer is in danger of administration is a reminder of headwinds facing the economy.
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Q1 GDP is likely to come in a 0.4% q/q, steady at 2.1% y/.y but definitely on a slowing trajectory. The scale of sterling short-covering is best seen in EUR/GBP, which looks overdone under 0.78.
We’ll stick with short GBP/NOK as the best way of reflecting twin views about oil (cautiously positive) and the UK economy (gloomy).
Other ways to express views: Short EUR/RUB remains attractive. Jason still like shorts in SGD/INR. There’s about more to take out of shorts in USD/CAD and AUD/NZD longs are still performing, while we still like shorts in CHF/SEK.
But the time is coming, with a growing focus on China’s debt problems and a market that has fully embraced the Fed’s dovishness, to figure out how to get outright long the US dollar again.