GBP Rally Beginning to Look Overdone - Danske

GBP Rally Beginning to Look Overdone - Danske

20 May 2016, 18:33
Roberto Jacobs

GBP Rally Beginning to Look Overdone - Danske

Analysts from Danske Bank, mentioned that the pound rallied in the market after a lead of the “remain” position ahead of the Brexit referendum but they warned about biased polls. Also they point out that their models suggest the GBP rally may be overdone.

Key Quotes:

“Opinion polls continue to signal a close race but ‘remain’ is still ahead in most polls. Most notable was the Ipsos MORI poll published two days ago, which showed a 55% to 37% lead for ‘remain’ (from 49% to 39%). Although the poll showed a big lead for ‘remain’, we think one should be careful not to over-interpret the poll result. The poll was conducted by phone, which usually means a bias towards ‘remain’.”

In the FX markets, the GBP rallied sharply this week supported by polls showing an increasing lead for the ‘remain’ camp and stronger-than-expected economic data. While some of the GBP strengthening is justified by the strong data and an increase in short-dated UK interest rates, our short-term financial models suggest the GBP rally is beginning to look overdone. In particular, GBP/USD currently looks stretched and is currently 2pp overbought according to our models.”

“In terms of data releases, next week is a quiet week but we expect markets to continue to be sensitive to any polls, comments and/or reports on the upcoming referendum”.


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