Investment Banks Exiting Sterling Upside Positions
NatWest, the UK based lender and investment bank have exited a long running trade recommendation that looked to benefit from the British Pound’s appreciation against the Euro and the Swiss Franc.
An upside GBP/EUR position had been held since early 2021, eyeing the economic recovery by fading Brexit premiums and the country’s rapid vaccine rollout as key drivers. However, with the UK’s economic outlook currently facing significant second quarter challenges due to surging global and domestic inflation, boosted since late February by Russia’s invasion of Ukraine, overall confidence in long positions seem to be waning.
In level terms, amid the improvement in risk appetite throughout the European session, traditional safe havens such as the dollar and the yen were under some slight downward pressure with the euro holding a firmer tone. This is reflected by EUR/USD opening just shy of 1.10 with GBP/EUR falling lower to circa 1.1850. Cable (GBP/USD) on the other hand continues to trade within Friday range in between 1.30-1.31 range.
Datawise and already this morning, UK labour market data including the unemployment rate has been released. Beating expectations to edge lower to its pre-pandemic level of 3.9% in January. German ZEW (March) and Eurozone industrial production are also due later today. Market sentiment is likely to remain sensitive to headlines regarding the War in Ukraine, and the ongoing negotiations between both sides.