GBP/USD: Easy Gains Behind US; Where To From Here? – Standard Chartered

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What is the outlook for GBP/USD through year-end?

Here is their view, courtesy of eFXdata:

Standard  Chartered Research discusses GBP/USD outlook and turns neutral on the pair through year-end.

From here, we think the easy gains (Brexit and vaccine-optimism related) are behind us and that other drivers will be less supportive going forward. We think the most important drivers for the GBP in 2021 will be productivity (the slow drain out of the City of London hurts overall UK productivity potential as highly productive finance is replaced with other less productive sectors) and valuation-related factors (GBP’s recovery has closed most of the undervaluation gap from 2020),” SC notes.

Our view that GBP gains are capped for now is consistent with our estimate that Brexit has lowered the GBP’s fair value by around 7%, with our nearer-term (cyclical) measure of fair value (FVX-C) 14% lower after the June 2016 referendum and our longer-term measure (FVX) unchanged…As a result, we maintain our flat forecast profile of 1.40 from here through 2021,” SC adds. 

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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