Analysts at Citibank point out there is no consensus among Bank of England MPC members about negative rates, which may be positive to the sentiment around the British pound. They also consider escalation in US-China tensions and the concern of the second-wave crisis caused market fluctuation and limited the performance of the Sterling.
Key Quotes:
“Heightened risk aversion in global equity markets may weigh on Sterling, as will further QE from the BoE. We are dis-inclined to forecast more material GBP strength over 6-12m given the Brexit Transition Phase has not been extended yet. However, GBP is fundamentally cheap, and we note the reluctance of Cable to trade <1.18. A return to a more ‘normal’ economic/ market regime may see GBP trade more constructively and drift back towards levels witnessed at the beginning of 2020.”
“GBPUSD is coming back for the 3rd time to the strong resistance range at 1.2643-1.2678 and looks set to break this time. Such a break would potentially open up the way for an acceleration towards major resistance around 1.32-1.3250.”
“In the short term, as RMB and EUR may move stronger and DXY fall below the pivotal support level, GBP may be benefited.”
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