GBPCHF Long

We open long trade for GBPCHF

The reasons are:

While we are short-term GBP bears, we remain constructive on the medium-term
prospects for GBP – given our house-view that a politically acceptable withdrawal deal
will be struck between the UK and EU.

Based on the BOE’s latest r* estimates, we note that the term structure of UK interest
rates is around 75-100 basis points too low right now.

Long-term UK interest rate
expectations will remain distorted by Brexit no-deal risks in the immediate future – and any
sustained shift higher in the UK curve won’t transpire until some of these Brexit tail risks have been
concretely taken off the table.

Indeed, throw into the mix the unique Brexit uncertainties
surrounding the UK economy – and this renders r* an almost redundant factor for UK rate markets
right now. Indeed, when we think about the conceptual factors that drive r* – demographics,
productivity, fiscal policy, savings-investment imbalances, demand for safe assets – one could
argue that these would look inherently different in a ‘soft’ versus ‘hard’ Brexit world.

We open vs CHF beacuse is we thinking that will be very weak for next 3 month.