GBP: BoE rate cuts and restart of QE triggers for ongoing weakness - Westpac

Richard Franulovich, Research Analyst at Westpac, gauge Westpac’s North American clients view on the GBP fair value.

Key Quotes

“GBP fell about 30% both after it exited ERM in 1992 and during the 2008 credit crisis. A similar move would put GBP near 1.05, though at its current starting point it is not as obviously as heavily overvalued as it was both in 1992 and 2008 - GBP was nearer 2.00 then. Taking that into account there is a cluster of views that GBP’s post-Brexit vote equilibrium has a 1.20-handle: 1.20-1.25. The currency is now an important cushion against likely recession, likely BoE rate cuts and a restart of QE will be an important trigger for ongoing weakness.”