GBP Reversing Higher
News that the UK government will scrap controversial plans to abolish the upper tax bracket in the UK has been met with a sharp relief rally in GBP. On the back of the roughly 10% drop suffered over the 23rd and 26th of September, GBP has now fully reversed these losses across the board and is trading at or above pre- “fiscal event” levels.
Alongside the U-turn on policy, the move is due in part to massive buying at the lows as institutions and corporates sought to capitalise on the record lows in GBP. Additionally, speculation that the BOE will be forced to step up the pace of its tightening campaign is also driving buying here. With this in mind its now a good time to start assessing where the best long-GBP opportunities might be.
Where To Trade GBP Strength?
GBPCAD is an interesting pair because of the divergent monetary policy expectations. With the BOC having been the first to move on rates and currently the most hawkish of the G10 central banks, the BOC has now reached a place where the market is anticipating a slower pace of tightening with the BOC itself only projecting roughly .75% more in tightening. The BOE, however, which has previously been accused of being slow to act, is now seeing an uptick in tightening expectations with the market now projecting more aggressive action from the bank. With this in mind, GBPCAD looks to have room to reverse higher near-term.
Technical Views
Looking at GBPCAD on the monthly for a moment, we can see a huge bullish pin bar through the 1.50008 lows suggesting good scope for a continuation higher. While price holds above the 1.5354 level, the focus is on a move up through the 1.5744 level towards 1.6109 in the longer term. The retail market is currently 65% short, signalling plenty of room for an upside move to build as this position develops further.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.