Credit Suisse Trade Of The Week: Buy GBP/USD
06.09.2016, 06:36

Credit Suisse Trade Of The Week: Buy GBP/USD

"With a light data schedule for the US week ahead, we see potential for the GBP to rally the most among G10 currencies against the USD.

Firstly, the market is only beginning to acknowledge that the UK economic data may not come in as weakly as expected. Good data prints in services PMI, IP and house prices following other positive prints in manufacturing PMI and retail sales should continue to alleviate market concerns regarding the Brexit result and lead to an asymmetrically large rally in GBP crosses.

This leads directly to the second point - that market positioning is still extremely short and still has some way to unwind.

Finally, while the headline US payrolls number was not particularly weak, slow labor wage growth and a shortened work week should be sufficient (in combination with other weak data prints such as ISM and US political risks) to keep the Fed on hold and progressively price a Sep hike out of the picture over the week.

The main risks to the trade are if the upcoming data print unexpectedly worse, and if UK political developments signal a consensus forming around a "hard Brexit" policy cocktail,"

As a technical trade, CS booked profit today on its GBP/USD long from 1.3064 at 1.3355.

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