GBP/USD rallied hard on the elections announcement (see five reasons). After hitting a swing high of 1.2905, the pair went into consolidation mode. What’s next? Here are two levels:
Here is their view, courtesy of eFXnews:
GBP: Bounce More Than Just A Position Squeeze; Towards 1.30-135 Range – BTMU
BTMU FX Strategy Research argues that the GBP bounce in reaction to the UK snap elections will prove more sustainable and is more than just a position squeeze in a continued GBP bear market.
In particular, BTMU argues that this decision will in fact shift the markets’ focus away from the probability of a ‘Hard Brexit’ and an easing of those concerns can propel the pound further higher.
“If our interpretation is correct, the reasons for buying the pound are even more compelling. This snap election would therefore mean that the UK government is in fact shifting to a more balanced approach in regard to Brexit and not to the ‘Hard Brexit’ stance many are currently citing for the government’s reason for calling this election,” BTMU argues.
As such, BTMU suspects the calling of this election will slowly see this conclusion shift and the consequence of that should be GBP/USD moving back into the 1.3000-1.3500 trading range.
GBP: How Far Can GBP Rally Go? How To Play It? – Credit Agricole
Credit Agricole FX Strategy Research outlines its outlook and strategy for the GBP following its rally on the back of yesterday’s announcement from PM May of a snap general election on the 8th June.
CACIB argues that while the snap UK election is likely allowed PM May to push for her own, more moderate, the vision of Brexit, the EU is likely to stick to a tough negotiation strategy in order to discourage other EU exits.
In addition, CACIB argues that the UK domestic political uncertainty is likely to rise due to the uncertain outcome of the election and increasing chance of a second Scottish referendum.
