The UK is grappling with Corvid-19 as well as Brexit. What is the outlook for GBP in the third quarter?
Here is their view, courtesy of eFXdata:
MUFG Research discusses GBP outlook and maintains a bearish bias through Q3 targeting a move towards 1.21.
“From an FX perspective it is always about the relative and we would argue that the relative macro position for the UK is looking grimmer than most other major economies that will lead to further GBP weakness ahead…Our end-Q3 GBP/USD forecast is 1.2100,” MUFG notes.
“Yesterday, the GDP data for May disappointed, rising just 1.8% m/m, instead of the expected 5.5%. The 3mth/3mth GDP gain -19.1% was worse than the consensus – 17.5%. Manufacturing activity was stronger – so the primary factor in this weakness was from the consumer-dominant services sector, which gained just 0.9% m/m in May. The market expected a 4.8% increase.
The reality is that the UK will require further monetary support going forward…With the Brexit impediment thrown in on top, GBP will increasingly be viewed as part of the solution in providing stimulus through further depreciation ahead,“MUFG adds.
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