GBP/USD: Further downside pressure on cable towards 1.08 – Rabobank

Analysts at Rabobank continue to expect US dollar strength will persist into next year. They see the GBP/USD pair moving to 1.08 on a six-month perspective. 

Key Quotes: 

“Soft UK retail sales data provide evidence of demand erosion. Additionally, investors are wary about the outlook for public finances. The sensitivity of GBP to UK poor fundamentals is heightened by a huge current account deficit.”

“While the outlook for BoE rates is an important driver for the pound, it has been very clear that higher interest rates are no guarantee of currency strength if the fundamental backdrop is poor. Higher rates from the BoE may lend some support to the pound but sound public finances and policies that offer reassurances in the outlook for international trade, and productivity growth will be needed to repair the outlook for GBP. Against the backdrop of USD strength, we expect further downside pressure on cable towards 1.08 and look for EUR/GBP to tick higher to 0.88 in the months ahead.”