As a part of Brexit issue, the subject of immigration, potential for conflicts is already emerging, it remains unclear for the time being as to whether the UK will retain free access to the single market, and therefore the potential for setbacks in Sterling also remains high.

The trade deficit in the United Kingdom widened slightly by GBP 0.6 billion to GBP 2.3 billion in May from April of 2016.

The massive British current account deficit causes considerable concerns against the background of the continued uncertainty. The Bank of England (BoE) is aware of this too.

We expect the BoE to make a precautionary easing somewhere around 10-15 bps cut which is quite reasonable and at the same time communicate that more easing could come. BoE governor Mark Carney was very dovish in his recent speech stating that ‘some monetary policy easing will likely be required over the summer’ due to a deterioration of the economic outlook.

We are concerned about the fact that it is generally expected that the BoE will cut its key rate (possibly as early as tomorrow). This rate cut may be sufficiently priced in on the FX hedging market to ensure that it wouldn’t lead to any further damage to FX portfolio by additional Sterling weakness.

Well, the analysts are split on whether the BoE will cut by 25bp in July or stay on hold, markets have priced in an 80% probability of a cut in July. GBPUSD rose 0.20% to 1.3272, just off a two-week high of 1.3336 hit overnight, these momentary gains may be disrupted and the boost in major downtrend would be intensified provided the central bank eases with monetary policy.