Recent UK data has shown signs of a sharp slowdown. On August 18 UK retail sales came in below market’s minimum expectations and so did the UK PMI reading on August 23.
With GBP longs showing an extreme long position in the COT report the GBP was always going to be vulnerable to bad news and this resulted in a sharp GBP sell off on Aug 23. Furthermore, the slowing of the European and US PMI’s brought recessionary fears back to the surface on August 23 and sent bonds surging higher one again. This move into US Treasuries sent yields lower and helped lift the JPY. So, with markets nervous about the prospects of global growth will we see more bond buying? With GBP longs stretched will we see more GBP downside?
Looking at the seasonals ahead for the GBPJPY there is marked weakness ahead. Over the last 15 years, between September 18 and October 09 the GBPJPY has fallen 80% of the time for an average fall on 2.84%. Will that repeat again this year?
Major Trade Risks:
The biggest risk here is to do with the path of US monetary policy and that of the UK’s economy/inflation pressures.
Remember don’t just trade it, Seasonax it!