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The British pound has been under strong downward pressure lately. What is the outlook for the currency in Q1 of 2021?

Here is their view, courtesy of eFXdata:

We expect EUR/GBP to reach at 0.96 in Q1 next year, and be at 0.94% in a year’s time. GBP/USD is likely to return to 1.25 in Q1. That’s a 5% fall in the value of sterling in the next few months which will probably see the real effective rate fall to its lowest level ever at some point. Sterling’s biggest source of support is that it is already so cheap and sentiment is already so bearish, about the currency as well as the economic and political outlook. It’s already weaker than relative growth might suggest, or than relative rates might warrant. What it continues to lack, above anything else, is any kind of catalyst for a significant bounce,” SocGen adds.

In the meantime, despite an attempt at a bounce yesterday,  GBP/JPY shorts remain our favoured way of expressing a short sterling trade in the near term,” SocGen adds.

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