Analysts at Citibank point out the British Pound is fundamentally cheap. They consider a return to normality may see the pound trade more constructively, pushing GBP/USD back to levels seen at the beginning of 2020.
“Heightened risk aversion in global equity markets may weigh on Sterling, as will further QE from the BoE (Bank of England). We are dis-inclined to forecast more material GBP strength over 6-12m given the Brexit Transition Phase has not been extended yet. However, GBP is fundamentally cheap, and we note the reluctance of Cable to trade below 1.18. A return to a more ‘normal’ economic/ market regime may see GBP trade more constructively and drift back towards levels witnessed at the beginning of 2020.”
“GBPUSD has moved above the double top neckline a 2nd time increasing the chance of GBP backing to double top at 1.2648, with support at 1.2248 and 1.1959.”