GBP/USD: 6 reasons to remain short on the pound (Credit Suisse)

Credit Suisse believes that the GBP/USD remains bearish on the forex (short-term), targets move towards 1.16.

"There are six main reasons why we remain bearish on the GBP:

1- The UK economy is on the verge of a structural transition. A weak GBP may be necessary to "grease the wheels".

2- While the weighted valuation of the GBP is trading at historically low levels, such a method is less significant when economies are facing structural changes such as today in the UK.

3- The BoE seems comfortable with the decline of the GBP, and could still lower rates. We think it needs to decline below 1.10 for the BoE to respond.

4- With time, managers of global reserves could call into question GBP reserves that still are high.

5. The balance of payments is UK large (relative to the GDP) and contains leverage, which always leaves room for large movements on the forex.

6- We are not convinced that a hard Brexit is completely integrated into the markets.

Within the next 3 months, we remain bearish on the GBP knew. We forecast the GBP/USD at 1.16 and the EUR/GBP at 0.95."

Credit Suisse holds a sell limit order on the GBP/USD and a sell limit order on the EUR/GBP.