Pound Emerges a Winner From This Week's Flash Crash, Nomura Says
Pound Emerges a Winner From This Week's Flash Crash, Nomura Says
(Bloomberg) -- The flash move in Asian trading Thursday sent currencies from the Australian dollar to the Turkish lira tumbling, but one currency could emerge an unlikely winner: the pound.
The speed with which sterling recovered after breaching a 15-month low against the euro has inspired Nomura International Plc to renew a call to buy the U.K. currency. While strategist Jordan Rochester has been burned before by predicting pound gains given rapidly shifting Brexit sentiment, he sees the downbeat mood on sterling as overdone.
“What has encouraged us to enter into this trade is how well euro-sterling was sold when it breached 0.91 in the flash crash,” said Rochester. “Unless no-deal pricing or an election increase in probability, it’s hard for the pound to weaken more from here.”
The pound’s fate in the near term will depend on the outcome of a vote in Parliament on the Brexit deal set for the week of Jan. 14. Sterling got pummeled last month when Prime Minister Theresa May opted to delay the vote on a lack of lawmaker support.
Rochester recommended selling the euro-pound pair at 0.9037, with an initial target of 0.8850 and stop-loss level of 0.91. Sterling rallied versus both the dollar and euro Friday, gaining 0.4 percent to $1.2674 as of 12:35 p.m. in London. It strengthened 0.2 percent to 90.04 pence per euro.
To contact the reporter on this story: Charlotte Ryan in London at cryan147@bloomberg.net
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee
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