UK: The flow must go on - Nomura

Analysts at Nomura suggest that if you read through a political or economic report on the UK you would be lucky to avoid hearing about the impact of Brexit and all the bells and whistles that come with it.

Key Quotes

“The UK flow picture is not pretty, it was not before the referendum and it has worsened. FDI and portfolio inflows have slowed and domestic investor outflows have weighed on sterling with two quarters of net financial outflows. But this year’s Q3 flow tracking is on a better track and is in line with our more optimistic view for GBP. However, there is the short-term view of a higher GBP versus the long-term (meaning over many years) decline of where it fair value lies owing to a persistently wide current account deficit and higher-than-expected inflation. In the piece below we walk through the differing flow stories from the balance of payments, what our high frequency trackers say for the flows and how GBP fares from a valuation perspective.”

“We have been caught offside by recent speculation that Theresa May could step down, while holding our short EUR/GBP into the November BoE. A lot rests on the outcome of this; we can see that in the market premium in 1W option expiries. If she is to step down that could reopen the possibility of GBP reaching post-Brexit lows yet again and we would quickly get out of that long GBP position.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.