DIFFERENT CAMP - There are many out there who still feel the Pound has more room to drop and that we haven't seen the low just yet. Remember just a few months back, the Pound sunk to a 31 year low against the US Dollar below 1.2000. But I am in a different camp with this one. While I wouldn't rule out the possibility for another drop to challenge the lows, I view any dips from this point as formidable buy opportunities. My view rests on three premises.
ONE AND TWO - The first is that when it comes down to it, I don't believe Brexit will end up being all that hard and I believe the UK will be able to maintain access to the single market. And even if this proves more challenging, I believe the UK economy will be strong enough to push forward and show just how resilient it really is. The second reason has to do with inflation. The BOE recognizes the impact the declining currency has on inflation and it has conceded that it would be prepared to step in and raise rates to offset any rise in inflation.
THREE - The final premise is that technically, the Pound is oversold, while cyclically it should be at a longer-term low down here. Looking out 3 years, I believe the Pound is trading significantly higher and would even go as far to say we could be trading back above 1.5000 in 18 months or so. Right now, I have no position, but I will be looking to aggressively buy and hold into any additional dips towards 1.2000. We've seen a nice little pullback in recent trade and perhaps one more sharp drop and I will be getting long GBPUSD. Stand by.