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J.P.Morgan Lift Short GBP Exposure

GBP

Late on Wednesday J.P.Morgan noted that “cyclical crosswinds are likely to intensify for GBP into the autumn, as the UK economy navigates new fiscal initiatives against still-rising energy costs and CPI. G10’s worst case of stagflation will give GBP little reprieve until growth prospects meaningfully improve. Otherwise, the currency impact from the Conservative Party leadership contest will likely be confined to some tactical repricing of fiscal odds and the pass-through to more stagflationary BoE hikes; political issues beyond that are likely tertiary for sterling, or fleeting. The overall macro landscape therefore remains sufficiently challenged for GBP that we scale up our GBP shorts. We have been short GBP in a singular basket vs USD & CHF. We expand that position by rolling the basket into an outright GBP/CHF cash short (CHF remains a high-conviction long, including vs EUR), and we add a new 3-month put spread in cable.”

  • They rolled their GBP short vs basket of USD & CHF (marked at +0.75%) into selling GBP/CHF, with a spot reference of CHF1.1487 and a stop less set at CHF1.1800.
  • The cable put spread that they mentioned was a 3-month $1.20/$1.16 put spread (spot reference $1.2045), with a cost of 0.98.


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Late on Wednesday J.P.Morgan noted that “cyclical crosswinds are likely to intensify for GBP into the autumn, as the UK economy navigates new fiscal initiatives against still-rising energy costs and CPI. G10’s worst case of stagflation will give GBP little reprieve until growth prospects meaningfully improve. Otherwise, the currency impact from the Conservative Party leadership contest will likely be confined to some tactical repricing of fiscal odds and the pass-through to more stagflationary BoE hikes; political issues beyond that are likely tertiary for sterling, or fleeting. The overall macro landscape therefore remains sufficiently challenged for GBP that we scale up our GBP shorts. We have been short GBP in a singular basket vs USD & CHF. We expand that position by rolling the basket into an outright GBP/CHF cash short (CHF remains a high-conviction long, including vs EUR), and we add a new 3-month put spread in cable.”

  • They rolled their GBP short vs basket of USD & CHF (marked at +0.75%) into selling GBP/CHF, with a spot reference of CHF1.1487 and a stop less set at CHF1.1800.
  • The cable put spread that they mentioned was a 3-month $1.20/$1.16 put spread (spot reference $1.2045), with a cost of 0.98.