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Re-initiate sterling shorts vs. USD - JPMorgan

FXStreet (Bali) - Paul Meggyesi and Meera Chanda, FX Strategists at JP Mrgan, recommend short positions in GBP/USD.

Key Quotes

"The much-awaited Scottish referendum resulted in a win for the ‘No’ vote by a 10%pt margin. Our strategy heading into this key event risk was to hold a mixture of sterling shorts in options (1.63 cable one-touch) and cash (vs EUR and AUD), since we expected the currency to command a concession entering the event. The cable one-touch was triggered two weeks ago with sizable profits, but longs in EUR/GBP and shorts in GBP/AUD were stopped out just before the referendum date."

"At current levels, we still find value in being short cable. The motivation is primarily the massive mispricing in the US rate market which should keep Treasuries under pressure as the Fed gradually changes it stance. Moreover, the inability of sterling to maintain its strength post the referendum also suggests an overhang of positions that could prevent outperformance in the near-term, especially given the lack of major events this week."

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