Shortgpb
GBPUSD: US Re-Opening quicker than the UK? Short the Pound?✨ New charts every day ✨
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The US has been slowly re-opening after COVID. Meanwhile, while the UK has "modest" easing plans, they are still a bit behind on re-opening. This truism and a bearish trend for GBPUSD has us looking to short the pound and collect some of those sweet sweet US dollars. Overall we are going to be taking advantage of this shift in trend to try to look for short positions with the expectation that a slow or botched lockdown exit strategy for the UK could mean trouble for the pound.
Resource: time.com + www.poundsterlinglive.com
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1. Range MA is showing a downtrend on the 2 hour chart (Red bar color).
2. With this strategy, we are only entering Short on Bear signals from Bull/Bear Power while Range MA is signaling a downtrend (Red bar color).
3. We have not set a target for this trade, instead we will exit our position if the Range MA changes color or we get a Bull signal after our Bear signal entry.
Note: We not currently in a trade, but we have set alerts and will be updating this as it plays out. We have posted this idea simply for the current market Bias we have and to see how this idea works out going forward.
GBPUSD SHORT: DOVISH BOE M. CARNEY SPEECH HIGHLIGHTS - AUG CUTIMO Mark Carney was very dovish on the margin, certainly reinforcing their/ my view of an August cut being 90% on the table. The most supportive statements were "MonPol Important In Cushioning Effects Of Any Relapse In Recovery In Months & Quarters Ahead", "The MPC Does Not Have The ''Luxury '' and "More Should Be Done To Cushion The Effects Of Negative Shocks" - all of which infer that an August cut is very much on the cards - especially given that the BOE has been relatively neutral as yet, whilst they have increased the offering of interbank funding by a few £100bn, apart from that the BOE is yet to make any moves in conventional policy tools, which member/ market expects the BOE to do e.g. a Bank Rate cut and/or formal QE.
I personally am short GBP$ at these levels (see attached posts), and these comments from today have certainly reinforced my position given their dovishness, even more so when combined with yesterdays minutes which said "most MPC members expect to loosen policy in August" and "detailed analysis of all available policy tools is required" - both of which go hand as 1) they want to make sure they analyse the economy properly, which takes time (July too soon) yet all members expect August to be enough time to conclude/ act upon such analysis.
Not to mention, given bank forecast a median GBP$ price of somewhere near 1.225, being short in the 1.30+ imo is certainly probabilistically favourable, especially if you are able to execute close to the Post-brexit highs of 1.35 which has held as solid resistance and imo should do for the foreseeable future given we traded to lows of 1.38 before brexit so 1.35 is very expensive post brexit. Further, the median bank forecast was for a 25bps cut in the bank rate in July (with some calling for 40-50bps), so if that was the case in July, given BOE didnt deliver, this only increases the chances of a cut in August which imo will take GBP$ to 1.25xx.
USD demand increasing - Federal Funds Rate Implied PDF prices:
Also, on the USD side, demand is increasing which compounds the GBP$ short support, as the Fed Funds Rate implied hike probabilities are continuing to steepen. For example, since yesterday, the implied probability of a September/ November hike has increased from 12%/12% to 19.5%/20.8% - with, for the first time, a 50bps hike being priced at 0.4%/0.8% respectively; Decemeber's probability also steepened to its highest level post brexit to 40% from 33.7%, 50bps at 7.5% from 3.4% and 75bps for the first time at 0.3%.
This aggressive steepening in the rate/ probability curve is likely a function of the risk-on market we are in (SPX 4 new highs in a row), with 10y rates rallying TNX, averaging +4% every day this week. Further, I think the FOMC speakers comments which have 80% been hawkish this week has also increased confidence.
Gov Mark Carney Speech Highlights
- Monetary Policy Cannot Do Everything To Counter The Impact Of The Referendum
- MonPol Important In Cushioning Effects Of Any Relapse In Recovery In Months & Quarters Ahead
- BoE July Minutes, ''Broadly Consistent With My Personal View.''
- The MPC Does Not Have The ''Luxury ''
- Far Too Early To Draw Strong Conclusions On Precise Path Of The UK Economy
- UK Economy Is Unlikely To Crash, It Is Likely To Slow
- A Sharp Fall In Currency Rate Will Provide A Shot In The Arm To The UKâs Net Exports
- More Should Be Done To Cushion The Effects Of Negative Shocks
- Past Few Weeks Have Generated Considerable Uncertainty Around UK Economy, Policy & Politics
- Monetary Policy Should Stand Ready To Move In Either Direction
- Brexit Has Increased Materially The Degree Of Uncertainty
- Some Of This Uncertainty May Dissipate, But A Good Chunk Is Likely To Linger Over Next 2-Yrs
- Uncertainty To Weigh On Domestic Spending By Both Companies & Households For Foreseeable Future
- The Amount Of Slack In The UK Economy Is Likely To Steadily Rise
