GBP/USD: Despite recent news, still seen at 1.06 in a three-month perspective – Rabobank
Analysts at Rabobank continue to see difficult times ahead for the British pound. They point out that while expectations of a more prudent fiscal stance by the government inspired some bargain-hunters this week, the outlook for the pound remains troubled.
Key Quotes:
“The release earlier in the week of a much worse than expected print for UK August GDP data suggests that the economy is already sliding into recession. The economy shrank by -0.3% m/m following a downwardly revised expansion of just 0.1% in July. Given the extra bank holiday in September, which will weigh on output, it now appears very likely that GDP for the whole of the quarter will show a contraction.”
“The Bank of England warned in the summer of the risk of a five quarter recession starting in Q4 this year. Even without the debacle created by the government, an earlier start to recession would be a factor worthy of downside pressure on the pound.”
“The removal of unfunded tax cuts will come as a relief, but the line-up of UK fundamentals is still worse than they were ahead of the September mini budget. Over the coming days it will become more obvious whether the PM’s U-turns and the intervention by the BoE have done enough to reassure investors.”
“We haven’t seen enough good news to alter our 3 month forecast of GBP/USD1.06, though this assumes continued broad-based USD strength.”
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
