A global bonds selloff has pushed yields up across the board towards post-Brexit highs while the anti-establishment wave sweeping the western world could force a 'No' vote on the Italian referendum in December.
Strategic trade
Trade view / 06 July 2016 at 12:24 GMT

Sterling is sliding down a slippery slope

Managing Partner / Spotlight Group
United Kingdom

Sterling extended losses to fresh 31-year lows against the US dollar over the past 24 hours as fears over the consequences of the Brexit vote on the UK economy grew stronger following remarks and policy changes by the Bank of England yesterday.

GBPUSD tracked lower to 1.2797 during Asian trading. This marks the lowest level for this currency pair since September 1985.

The UK unit has been under severe pressure since the polls closed on June 23 when the electorate decided that the nation should leave the European Union (EU).


Source: Spotlight Ideas                                                                                                           
The time based technicals are split and as one might expect the short-term measures are either neutral or biased toward buying sterling in the belief that in the very near term the selloff in Asia was overdone and that sterling for now is oversold. 

However, I am not looking to trade GBPUSD on a short-term will be too time consuming and transaction costs are likely to erode a good deal of short-term gains.

Instead I am looking to side with the time technicals that extend from five hours and one month plus...these all suggest that one should be a strong seller of sterling relative to the dollar.

Sterling has lost more than 14% of its value since the June 23 referendum and it is highly likely that the Bank of England will cut the base rate by at least 25 basis points and expand the quantitative easing purchase programme.

This has to be paired with the lack of political leadership in the Conservative government and an ineffective and divided opposition. The net result is that sterling will decline over the summer and into autumn.

Source: Spotlight Ideas

Management and risk:

Parameters: GBPUSD
Entry: Sell 1.2967 12:52 BST
Targets: 1.2513 ... 1.2234 ... 1.2008 ... 1.1782
Stop: 1.4000
Time horizon: Strategic Trade

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
06 July
Philidor Philidor
I have to agree, this is a very sensible trade!

As someone who trades with options frequently, I'm tempted to buy a put outright, or a spread, when looking at such a wide stop. The stop loss above is at about 0.100 distance, while you can get a November-1 put with strike 1.28 for about 0.035, or a spread in the 1.28-1.20 range or thereabouts for 0.020. This is tempting because it would allow you to increase the position size significantly - though of course the risk of taking a loss with sterling merely remaining at current levels is thrown into the mix.

What do you think?
06 July
Philidor Philidor
Correction, the spread comes in at 0.025 or so. I was looking at the asking price!


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail