Overall, I am bullish on GBP. I believe the currency was sold off too sharply versus EUR, CHF and USD after Brexit. On June 8th, there is going to be a general election in Great Britain. I think this will be the start of the turn in GBP.
I am bullish on GBP versus EUR long term. The cross has been getting rocked because of two things, lately. I am waiting for these “events” to pass before it is time to get into this market.
First, the British election is getting interesting. This has traders nervous. GBP has been offered from this. Boil it down to two things: No matter what, Brexit will happen, and, no matter what British politicians are going to negotiate the very best deal possible. So, who is going to end up being in Parliament when it happens? No idea. But, they will put Britain’s best interest first, I imagine. Also, these politicians are not going to be the ones that do the negotiating. That will be left to negotiators. I think Britain will do fine with this.
The other event is the ECB is very likely to drop its overwhelming dovishness. This is going to push EUR upward to some extent. But, when you compare the economies of both Great Britain and the EU, Britain is far better off. Interest rates are going to move higher, faster in Britain relative to the EU. So, while everyone is singing the praises of the EU for th e time being, the Bank of England’s turn is just around the corner.
In both of these cases, versus EUR, GBP will turn. It is a waiting game until two events work their way through. Then, GBP will move higher.
The next currency for GBP to move upward against, significantly, is the Swiss Franc (CHF). Relative opportunities will exist that favor GBP over CHF. Over a significant period of time, CHF is going to wither away. I expect over the course of several years the move in GBPCHF lower will return back to where it was before the financial crisis. This is a huge opportunity.