- GBP/USD continues to trade in a sanguine fashion into year-end, despite year-end serving as the official deadline for a U.K.-EU trade deal.
- Without a trade deal, a so-called "hard Brexit" scenario could serve a harder blow to the U.K. economy than even COVID-19 has, thus far.
- Short-USD positioning is seeming to support a firmer GBP. It would appear that short-USD flows are masking GBP's weaknesses.
- While two caveats (including the inflation-adjusted yield, and Purchasing Power Parity) support a stronger GBP, this does not seem like the perfect time to be pricing in a lower USD premium into GBP/USD.
- I believe weakness is overdue for GBP/USD. A more sensible price level would be at or below the 1.28 handle, here in late-2020.
For further details see:
GBP/USD Remains Vulnerable To Downside In Spite Of Recent Strength As Brexit Looms