In the UK, key events in March include the annual budget and the BoE rate decision. What is the outlook for GBP/USD?
Here is their view, courtesy of eFXdata:
Credit Suisse discusses GBP outlook and flags a scope for the next leg lower on a break below 1.2700.
“In the UK, we note the debate around fiscal easing at the Mar 11 budget has transformed from a positive narrative of productive forms of fiscal easing to a focus on pushing resource allocation towards transitory measures to fight Cov-19. This is disappointing for GBP bulls who for months have clung to hopes that fiscal stimulus holds the key to a material rally…Especially as the BoE, which GBP bulls had hoped to see hiking in 2020 due to fiscal easing and a post-election recovery in private investment, is now likely to cut by 25bp (as CS economists expect) at its MPC meeting on Mar 26,” CS notes.
“GBPUSD meanwhile is pushing on the lower end of our 1.28-1.33 predicted range. While a stronger EURUSD may help that level intact, we suspect a close below the 200-day moving average around 1.2700 would open the path for a deeper sell-off towards 1.2400. This move may need to wait though until after the Mar 11 budget is out of the way and the Mar 26 BoE meeting delivers a dovish rate cut, with scares around EU trade talks going badly the likely added catalyst for the next leg lower,” CS adds.
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