Jason Wong, Currency Strategist at BNZ, suggests that the GBP has fallen significantly since the Brexit referendum and looks very cheap amongst global currencies, but BNZ is not convinced that it has fallen by enough.
“Recent UK economic data have held up better than expected in the Brexit vote aftermath, but we think that it is just a matter of time before signs of weaker activity are forthcoming. A “hard Brexit” has become more likely and the economy faces a prolonged period of economic uncertainty, which should lead to a slump in business investment. In the meantime a large current account deficit needs to be funded. It points to further upside pressure in NZD/GBP over time and a risk of breaking GBP0.60. Volatility in the cross is likely to be greater than average and corporates should be opportunistic in their hedging.”