GBP/USD: Highly volatile, brief drive below 1.34

GBP/USD has seen its decline resume, breaking below the 1.34 level before a rebound, in what continues to be very volatile conditions amid the huge uncertainty surrounding the Brexit situation.

As it's well known in financial markets, if there is one element investors tend to move away from, that's uncertainty, which in the case of the UK and subsequently the Pound, has never been higher for the last 3 decades, ever since the counry joined the EEC in 1973.

GBP: Don't expect path to be a straight line - Nomura

According to Nomura's FX Strategy Team: "Beyond the knee-jerk reaction of markets, the likely path of GBP is unlikely to be a straight line. There is scope for additional downside towards 1.32, but some profit-taking on shorts and a return of market liquidity could prompt a moderate recovery in GBP/USD in the very short run."

Nomura adds: "In previous FX shocks in the UK, GBP declined 10-15% on a tradeweighted basis over subsequent months, and we would not be surprised to see a similar decline this time. This suggests that the 1.30-1.32 could likely form a base, and any extreme breaks to 1.20-1.25 could provide a very compelling entry point for long positions."