TD Research discusses GBP outlook and likes playing the cross's recent range via fading the extremes between 1.35-1.40 (long below 1.35 and short above 1.40).
The market has pared back its expectations of BoE rate hikes and today's wage number underscore room for one more hike this year (TD expects a hike in Aug). With the market pricing in around 19bp worth of hikes into yearend, we think there is room for GBP to recover some lost ground, though the next few weeks will hinge on Brexit discussions.
The BoE is still a second-tier driver for GBP, given the flatness of the yield curve and the fact the BoE is hiking into a weak supply side.
Near-term a mix of BoE and Brexit leave us range bound, looking to fade the extremes between 1.35 and 1.40," TD argues.