TD Research discusses GBP/USD outlook and notes that while Cable has been among the top-performing currencies in the majors month-to-date, the rally does not jive with the data, which stalled at the start of this year.
"For GBP, the recent softening on the Brexit risks has probably sought to fight off a string of weak data...We also note the seasonal pickup in capital flows has perhaps played a role in the perky pound.
Still, we suspect that it has probably run ahead of the data and news-flow, leaving it vulnerable to correction on a downside CPI print.
Our HFFV sits at 1.399 and GBPUSD is running about 2% above the midpoint of the 2m range. We would look to play it from the short side this week," TD argues.