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.
“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.”
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