Yesterday saw the Pound posted its worst performance against the USD in over a year and the Euro since April. I will save the column inches and point you to my recent post, discussing the concerns I had over the currency and why it was in a precarious situation.
However, now that we have seen a sizeable drop in the currency, adding to GBP shorts at current levels on a short-term basis is a lot less appealing. Don’t forget that we are nearing the end of month rebalancing which had likely exacerbated the move lower in GBP and quite possibly, post-month-end moves might see a modest reversal. The table below shows momentum in GBP is very bearish, with a Z-score of over 2 against the currency vs USD and EUR, this is another factor that warns against chasing GBP lower.