Believe in the GBP / USD Uptrend: Brexit Fears Overblown say Swissquote

"Brexit negotiations are making slow progress, but we think the markets’ fears of a Hard Brexit are overblown."

It’s not the best of times for Pound Sterling at present - the currency is the second-worst performer in the G10 currency space this August, having lost some 3% in value.

While there are more than enough calls for further downside out there, it is the views of the contrarians that we are interested.

The mantra of J. Paul Getty comes to mind: “Buy when everyone else is selling and hold until everyone else is buying. That’s not just a catchy slogan. It’s the very essence of successful investing.”

Taking a lead from Getty in the mid-week currency trading session is Yann Quelenn at Swissquote Markets who in a market briefing states, “British Pound to rise on strong economy, soft Brexit.”

From lows of around 1.20 USD just after the Brexit vote in June, the GBP has climbed back to the 1.30 range, and Quelenn believes it has further room to grow.

How so?

One boost will come from UK Q2 GDP figures, to be released Thursday morning says the analyst.

The data are expected to show robust, solid growth of 1.7% (annualised).

"Brexit negotiations are making slow progress, but we think the markets’ fears of a Hard Brexit are overblown. The likelihood that all 27 remaining European Union member states will line up together against the UK is very low,” says Quelenn.

Who adds, “the likelihood that they all line up together against anything is rather low. The EU has a lucrative trading relationship with the UK, which it will not want to destroy.”

Indeed, as noted in a recent position paper on Brexit released by the UK Government, “the EU exports goods worth €314 billion (around £257 billion) to the UK, more than to Brazil, Russia, India and China combined, which is why it is in no-one’s interest to see disruption and uncertainty.”

As such, “there may be GBP weakness in the medium term, as investors show nerves, but the longer-term outlook is bullish,” says Quelenn.

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