GBP/USD: Neutral as no deal Brexit risks increasingly discounted - CitiBank

Matías Salord FXStreet

In their weekly strategy report, analysts at Citibank, explained that recent weakness of the Stearling is pricing in Boris Johnson as the next Prime Minister and his desire to enact a hard Brexit. Political uncertainty remains the obvious downside risk according to them. They forecast GBP/USD at 1.24 over a period of 0-3M and at 1.35 in 6-12M.

Key Quotes:

“We remain pessimistic saying that a new PM is unlikely to resolve UK Brexit gridlock. We also now believe that BoE rate cuts are possible, not just in a “No Deal” Brexit scenario but also if Brexit is delayed and the global economy weakens. But there’s a lot of bad news in the price. We are neutral to GBP as “No Deal” Brexit risks increasingly discounted.”

“GBP/USD’s key support remains at the pivotal 1.2449 level followed by the June 2017 lows at 1.2350, March 2017 lows at 1.1985 and December 2016 lows at 1.1841. A weekly close above 1.25 however would likely stabilize the unit ahead of announcement of new PM and the August 1 FOMC.”

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.

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