GBP/USD: Impressive recovery – Lloyds Bank

Research Team at Lloyds Bank explains that after having continued to weaken much of the past month, GBP/USD has posted an impressive recovery in recent days.

Key Quotes

“Concerns over the impending start of EU exit negotiations and demands from the SNP for a second independence referendum appear to have been overshadowed by ongoing economic resilience and a less dovish March MPC meeting. GBP/USD has bounced back to around 1.24 since hitting low of 1.21 earlier this month.”

“Near term, however, the potential upside for sterling looks fairly limited and we see risks that GBP/USD remains under pressure, particularly as negotiations around the UK’s exit from the EU commences. Nevertheless, we believe there is scope for GBP/USD to benefit from what we expect to remain a relatively resilient UK economy and a further softening of the US dollar, possibly in response to a scaling back in US stimulus prospects. While we believe sterling looks undervalued at current levels, it is likely to remain vulnerable to significant bouts of volatility, particularly as the EU exit negotiations get underway.”