Currency investors should consider GBP/USD this week, advises Credit Suisse in its weekly FX pick to clients.
"We expect BoE to marginally tweak down its dovish tone this week, which should give a brief lift to the pound.
We see little incentive for the MPC to be any more dovish than the
market is already pricing in for the remainder of the year (around 7bp
of cuts). In fact, at this point the BoE may now even want to avoid
raising the market's expectations for additional easing, given some of
the glitches it has had with QE bond shortages and the uncertainty of
whether it needs to save ammunition for a 'hard-Brexit'. The MPC may
take advantage of the stretch of recent data to paint a more balanced
'wait-and-see' message - perhaps by sounding encouraged by the
pass-through of the recent rate cut or more concerned about the upside
While FX markets do not seem to be pricing in a particularly eventful
or dovish MPC meeting, positioning remains highly short in GBP, and the
pound has not hesitated to rally in response to local data and MPC
guidance,"CS says as a rationale behind this call.
"The main risk to the trade is
if the MPC takes a very dubious read of the last few data points -
though we think the MPC would want to avoid draining away the recent
stabilization in confidence," CS adds.
As a technical-based trade, CS ru