Australia’s Economic Growth Slows in Q3 Despite Strong Investment Activity 
Geopolitical Shocks That Could Reshape Financial Markets in 2025 
S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Spain’s Industrial Output Records Steady Growth in October Amid Revised September Figures 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
IMF Deputy Dan Katz Visits China as Key Economic Review Nears 
BOJ Governor Ueda Highlights Uncertainty Over Future Interest Rate Hikes 
Asian Markets Mixed as Fed Rate Cut Bets Grow and Japan’s Nikkei Leads Gains 
China’s Services Sector Posts Slowest Growth in Five Months as Demand Softens 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
Gold Prices Edge Higher as Markets Await Key U.S. PCE Inflation Data 
US Gas Market Poised for Supercycle: Bernstein Analysts 
Asian Markets Stabilize as Wall Street Rebounds and Rate Concerns Ease 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
GBP’s performance ranks mid-table over the past month (+0.5% vs USD, -2.5% vs EUR) as the global impact of the coronavirus has come to dominate GBP's local difficulties with Brexit. But even though Brexit is now being overshadowed by an even more existential crisis, this doesn’t let GBP off the hook, far from it actually, as the accelerated removal of GBP's interest rate support as the BoE prepares to respond to the COVID-19 shock will further undermine the sustainability of the UK's worst-in-class current account deficit (a 4-5% of GDP current account gap is incompatible with the UK's new reality as a low-growth, low-yielder).
In addition, while Brexit is being overshadowed, this is only temporary and GBP remains vulnerable from a great sense of realism amongst investors about the government's objectives for the EU trade talks and its credible threat still to walk away in the pursuit of regulatory autonomy from the EU and freedom from strict level playing field commitments.
As a result of the Brexit-virus one-two we are lowering the GBP forecast. The point of maximum jeopardy is expected to be around mid-year as the trade talks reach their make-or-break point (remember that the government has legally barred the transition period from being extended beyond end-2020) and the risk of no- deal crescendos.
Options Strategy (Debit Put Spread): Contemplating above factors, wise to deploy diagonal options strategy by adding short sterling: Stay short a 1M/2W GBPUSD put spread (1.25/1.14), spot reference: 1.2340 level.
The Rationale: Observe the 3m GBP’s positive skewness that has stretched towards OTM Put strikes, hedgers have shown interests for bearish risks.
To substantiate the downside risk sentiment, risk reversal numbers have still been signalling bearish hedging sentiments in the long run. Hence, we advocate the diagonal options strategy on both hedging and trading grounds.
Alternatively, activate shorts in GBPUSD futures contracts of April’20 deliveries with an objective of arresting potential slumps. Courtesy: Sentry, JPM & Saxo
