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Forex Fundamental Analysis

Thu,13 Oct 2016-   FundamentalOutlook

GBPUSD Trading View

The Pound sterling is in deep pressure because of “Hard Brexit”. As after the mysterious flash crash on Friday, there is an expectation and fear of extreme volatility in the currency while keeping in view the governments stance of Hard Brexit. Market is now heavily positioned for the pound to depreciate further. As on Friday, information was released by the Chicago Mercantile Exchange which indicates that on Tuesday net short sterling positions is going to bounce record levels.

The tumble of sterling isnt finished, Koon How Heng, a senior foreign-exchange strategist at Credit Suisse, told CNBC, as the currency dropped below Julys post-Brexit referendum low.

"We still have a very negative view on the sterling," Heng said

“We are starting to see more discussion about what Brexit means and the possibility of hard Brexit is putting pressure on the currency,” said David Zahn, head of European fixed income at Franklin Templeton Fixed Income Group. “Now it all comes down to the negotiations?…?This is raising a lot of uncertainty — and investors dont like uncertainty.”

Whereas Robobank in its sterling forecast is showing lower rates of sterling and expecting it to fall to $1.18 by mid of 2017 which will result in the value of euro to rise. Stephen Jen, chief executive of asset manager Eurizon Capital, is of the view that sterling is “grossly overvalued” and “I see a V-shaped trajectory for the pound in the coming quarters.”

..Sterling dollar pair

Since March 1985 the pair is at present at its lowest level, when the pound neared parity with the U.S. dollar in the middle of an acrimonious miners strike in the U.K.

"Officially, our forecast for sterling dollar is at 1.25," Heng told CNBCs "Street Signs" just hours before the currency took its latest leg lower. "We would think its going to head lower. Its probably going to go down the tubes.". Hang also prominated that sterling wasnt just selling off against the dollar; it was also falling against all the major currencies.

The Sterling sentiment will remain crucial unless there is some eye-opening remarks from Carney (Governor of the Bank of England) and his team we would expect political headlines to be in command

Aimen Tayyab
Financial Analyst