Analysts at Citibank, consider that the Pound could rise further against the US Dollar if the UK Parliament votes for Prime Minister Johnson Brexit plan. They also see GBP/USD falling to 1.25-1.26 amid prospects of a general election and/or another referendum.
Key Quotes:
“UK and EU approved the new Brexit deal at EU Summit. The odds of nodeal Brexit reduced significantly and once supported the GBP.”
“We are not convinced that a Withdrawal Agreement between the EU and UK Government will be ratified in the UK Parliament, and hence we are reluctant to forecast GBP much higher from here. However, the Benn Act means that 19th October is the de-facto deadline on a deal before the 31 October A50 deadline, and thus acts as a floor under GBP in the short term. A50 extension to January 2020 closely followed by a General Election are the most probable outcomes.”
“Cable’s rally may come too far and too fast and would pull back in the short term before heading to higher level, with resistance at 1.3045-1.3185 and support at 1.2670-1.2784.”
“If UK Parliament passes PM Johnson’s Withdrawal Bill (50% probability), GBP/USD may target 1.32-1.34. If Labour ally with Liberal Democrats in general election, the coalition may push forward the second referendum polling and favor GBP.”
“If the UK House speaker turns down Boris Johnson’s demand for a meaningful vote on the deal, the prospect of a UK general election/ 2nd referendum may raise and GBP/USD may pull back to 1.25-1.26 area.”
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