GBP/USD: Weakness to re-emerge in the months ahead – ANZ

The cable has stabilised but remains vulnerable, analysts at ANZ Bank apprise.

Key quotes

“We expect Q1 GDP to fall 2% q/q and Q2 GDP to contract by 10% q/q. Overall, UK GDP is expected to contract by 6% this year.”

“Whilst we expect some compromise with the EU, that doesn’t mean Brexit uncertainty won’t return to weigh on the GBP in the interim. 

“Near-term, it is difficult to construct a bullish profile for the GBP, given the backdrop of plunging growth, sharply rising unemployment, a large twin deficit and an anticipated focus on Brexit.”

“We do think Brexit anxieties will resurface in coming weeks. Investors could renew concerns about the UK’s future economic structure and reshine the spotlight on the UK’s huge financing requirements (about 20–25% of GDP this year). We, therefore, expect GBP weakness to re-emerge in the months ahead.”