JPMorgan Doubles Down on Pound Brief After Sudden Rally

(Bloomberg) — The pound’s dominant September rally is flashing a sell signal to JPMorgan Chase (NYSE:) & Co.

The British currency gained against all of its Group-of-10 peers this month as traders reduced odds of a no-deal Brexit at the end of October. That’s made the pound’s valuation “no longer as cheap” as Britain hurtles toward an Oct. 31 deadline to leave the European Union, strategists including Meera Chandan wrote in a Sept. 27 note.

The bank recommends selling the British currency against the Swiss franc, given that the odds of an exit deal by end-October are “very low” and the odds of a hard Brexit by January have increased. Additionally, Bank of England policy maker Michael Saunders’s unexpected dovish shift last week adds conviction to the short-sterling view, according to the analysts.

“Against this backdrop — not-so-cheap valuations, ongoing political uncertainty with risks of ‘no deal’ still lingering and a more dovish BOE — we view risks to GBP tilted to the downside,” Chandan wrote.

The pound’s gained over 1% against the dollar in September, and has climbed roughly 1.9% against the Swiss franc to trade near 1.2270. JPMorgan recommends selling pound-franc at 1.22, with a stop at 1.2450.

Recommended trades against the pound have been “light” since early August, given the magnitude of bearish positioning against the currency, the analysts wrote. However, after sterling’s September rally, speculators are the least bearish on the pound since late July, according to the latest Commodity Futures Trading Commission data.

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