GBP/USD: fundamentally bearish, targets 1.25 for the year-end - Scotiabank

Shaun Osborne, analyst at Scotiabank notes that they remain fundamentally bearish on the GBP as they expect the Brexit process to weigh on growth and the government’s stance to compromise prospects for the services industry. “We continue to target 1.25 for Cable at the end of the year.”

Key Quotes

“Sterling retains a soft undertone though here too, recent ranges remain intact. BoE MPC member Shafik suggested that more easing may be required, even if the economic “radar” is flashing a little less “red”. That sentiment largely reflects the messaging from Governor Carney, however, and has not had a material impact on the GBP so far.”

“We remain fundamentally bearish on the GBP as we expect the Brexit process to weigh on growth and the government’s stance to compromise prospects for the services industry. We continue to target 1.25 for Cable at the end of the year.”

“GBP/USD short-term technicals: negative—Sterling remains precariously close to key support at 1.2925. The pound has found little real lift from the lows since testing support earlier in the week and we expect near-term gains to remain capped in the 1.3050/55 area. Gains above here would provide a little more relief but the broader undertone remains soft and trend strength indicators remain bearishly aligned across the short, medium and long term studies. This should keep GBP/USD better offered on modest gains.”