Sold GBP USD dovish BoE Carney Mansion house speech

Tue 6/20/2017 6:57 AM MDT

Real Time AmpGFX – sold GBP/USD

Sold half unit GBP/USD at 1.2655

Position

Short half unit NZD/USD at 0.7243; s/l  0.7313

Short half unit GBP/USD at 1.2655; s/l 1.2768

Comment

The changes of a rate hike in the UK appear slim.

With inflation rising, real rates are now lower.

A reluctance to raise rates will mean that if GBP does resume a slide, market may fear more inflation and weaker real rates that tend to reinforce a fall in the GBP and force the BoE to belatedly raise rates which could undermine confidence in the economy and asset prices more generally.

Brexit negotiations may struggle due to lack of political leadership and infighting in parliament over the form of Brexit.  Even if there is a shift back to a possible soft Brexit, it is likely to raise more questions than answers.

A risk is that the market latches on to the idea that a change of UK government leadership could shift the plan to a softer Brexit. An idea that may be given some life by the speech today by the Chancellor of the Exchequer Hammond.