GBP exceptionalism under pressure – ING

Our best understanding of yesterday's Pound Sterling (GBP) sell-off is that the global bond market sell-off touched a raw nerve in the gilt market and that then the gilt spread widening prompted investors to cut back on overweight GBP positioning, ING FX analyst Chris Turner notes.

Modest downside risks for GBP

“Perhaps most relevant for GBP here is the positioning data, where investors had felt that GBP could best withstand the over-riding strong dollar trend.”

“The gilt sell-off has however dented that confidence in GBP and the risk now is that GBP longs get pared as investors reassess GBP exceptionalism. As we all discuss in that article, we do not see very strong reasons for the gilt sell-off to extend for local UK factors, but there now looks to be some modest downside risks for GBP. We stick by those GBP levels we mentioned in the reaction article.”