Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Short term
Trade view / 08 July 2016 at 7:17 GMT

#SaxoStrats: A punt on cable ahead of NFP

Global Macro Strategist [Asia based] / Saxo Bank

This is a rather uncomfortable and risky trade as we go long USD versus GBP (short cable) ahead of  the US nonfarm payrolls figures (risk to the upside for USD) and the Bank of England policy-setting meeting on Thursday next week where the market expects a 25 basis points cut from the current 0.5%.

The structural picture for the UK looks very challenging economically, politically and from a monetary perspective. Sterling feels the weakest hand in the majors right now and any risk-off from USD strength should have an adverse effect on GBP.
Management and risk description

Key risks to the trade are poor NFP numbers (+180,000 new jobs are expected). Also if the BoE is not as dovish as foreseen and finally a potential sterling squeeze as it's been massively oversold .

Entry: Short GBPUSD 1.2950

Stop: 1.3250, -2.3%

Targets: (50% each) Target 1: 1.25, +3.6%, Target 2: ad hoc.

Time horizon: 1-4 weeks

Cable may still have further to fall:
 Source: SaxoTraderGo

— Edited by Clare MacCarthy

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