GBP/USD: Sterling to face downside risks going forward – Commerzbank

GBP/USD is displaying a lackluster performance. Economists at Commerzbank expect the pair to see another leg lower.

Sterling likely to resume its downward trend quite soon

“High volatility at the short end makes me doubt that the financial market will give the government and the Bank of England until November to find an answer to the turbulence. And even then, there would still be the risk that the measures announced will not be sufficient to regain market confidence.”

“I see the urgent need for confidence building measures and as long as the government does not give in, this will include, first and foremost, the BoE’s clear commitment to hike rates significantly to limit the increasing inflationary risks due to the announced tax cuts, sterling weakness and the new bond purchases. Otherwise, sterling is likely to resume its downward trend quite soon again.”

“For now, we continue to see significant GBP risks going forward.”