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Has the market priced in too much gloom in GBP?

No rate hike expected until August 2019

The market plays a game of push-and-pull with the Bank of England. About once a year, BOE Governor Mark Carney takes the podium and warns that markets are underestimating the risk of a rate hike.

That's followed by a jump in the pound and depending on the economic data, it's usually sustained for awhile.

Invariably, rates and inflation pressures eventually ebb and reality comes crashing down -- countries with less than 3% nominal GDP growth don't need higher rates.

Back in early December, the cycle peaked with an October hike priced in. Shortly afterwards, it began to unravel and the culmination my have been late in January when Carney finally admitted defeat.

Since then cable has begun to show some life. Expectations are so low now that the chances of a recovery are higher than the opposite. At the same time, US prospects are overstated and that could help the other side of the cable trade.

I think there is a good case for buying GBP/USD today with a target at 1.4880 and a stop at 1.4370.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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