GBP/USD: Bad news on all fronts – Rabobank

Sterling is facing pressure on a variety of fronts. The prospect of more monetary policy stimulus, a deep recession and political uncertainty is set to weigh on the pound. Therefore ,economists at Rabobank have revised down their already gloomy GBP forecasts. FXStreet’s analyst Yohay Elam also sees the cable suffering. 

Key quotes

“The UK is being slower than many other countries in Europe to unwind its lockdown measures. This threatens to enlarge the toll on the economy which in turn places further pressure on policy makers, both fiscal and monetary.”

“There is a real risk therefore of the UK and the EU trading on WTO terms from January. [...] The prospect of confusion and queues at borders is likely to weigh on investor sentiment while the threat of tariffs on food and disruption for supply chains could further undermine consumer confidence.” 

“In the wake of the headwinds facing the economy perhaps it is not so surprising that various BoE officials including Governor Bailey have indicated that the case for negative interest rates in the UK is under ‘active review’. [...] In addition, the market is prepared for an increased QE target from the BoE in June.”

“We now target GBP/USD 1.19 in 1-month and GBP/USD 1.18 on a 3-month view.  We had previously targeted GBP/USD 1.19 on a 3-month view.”