GBP/USD: Now it gets serious! — UBS

FXStreet — The most recent polls show a deadlock in Parliament, said the market analysts of the Swiss Bank UBS.

Important Quotes:

For this purpose, a protest group of voters would be likely to be responsible than a year ago at the Brexit vote. How would react the pound?

Any surprising weakening of the current government would bring, in our opinion, the currency under pressure. A reshuffle of the Brexit negotiation teams would not be located in the markets is likely, so that the uncertainty would have an impact on the currency.

For this reason, the pound sterling depreciated in the beginning of this week easy, as the surprising surveys have been published. A victory of Labour is not our base scenario, and would probably cause a re-GBPUSD-fall to 1.20, the state after the Brexit Referendum,. As in the last year the pound will make it but probably lost ground again betting once the markets have to adapt to the new conditions and a new government has made its strategy clear.

Brexit negotiations, a Labour government would be likely to run in a consensual, since the party has closer Links to Europe than the Conservative party. Also in the case of a possible negative Surprise, we detect no reason for the continued weakness of the pound.

In addition, the British economy benefited from the weakness of the pound, what we have already in the last year experienced. In the case of 1.20 to 1.30 against the U.S. Dollar and approximately 0.86 against the Euro, the currency in our opinion is quite cheap. Reasonable balance assumptions suggest that a decrease of the British pound is likely to be a good long-term buying opportunity.

The election results in line with expectations, so a solid win for the Tories, is likely to lie, however, lead to strong GBP-negative. Since mid-April, the GBPUSD rate keeps to be in the range of 1.28 to 1.30. We would assume that he would remain in this range. The higher volatility in the option markets is likely to decrease, if the election as expected.

** FXStreet News Editorial, FXStreet**

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