Brexit trade: GBP/USD the better Brexit hedge over EUR/GBP - Nomura
|Analysts at Nomura explained that GBP/USD the better Brexit hedge over EUR/GBP, and said it’s long carry too.
Key Quotes:
"We had been short GBP/CAD into Chequers and were frustrated by the newsflow in its immediate aftermath. There was a barrage of market commentary as to why the Chequers deal = soft Brexit and GBP should head higher as a result of sell-side participants. GBP/USD was indeed heading higher on the London morning session and despite our view that the USD should outperform GBP and the politics would turn messy, we reduced our risk just hours before Boris Johnson’s resignation, which turned the tide for GBP."
"Unfortunate timing for a tactical trade, but we remained sufficiently pessimistic to look through the initial Chequers’ price action. We remained focused on the coming hurdles of parliament and the negotiation process with the EU and did not advise any GBP longs. Instead, we expected the summer to be a longing period of the market hoping for progress in Brexit, but with little information to work with and GBP to continue to suffer as a result."
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