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Analysts at MUFG Bank remain bearish on the pound and see increased prospects of a decline below the 1.2000 level versus the dollar.

Key quotes

“There is an increasing risk that investors view the outlook for the UK more negatively relative to elsewhere, thus encouraging increased speculative selling.”

“Growth may have contracted by around 15% in Q2, with downside risks given a tighter lockdown is set to continue longer in the UK than elsewhere. That’s looking like the UK will be on the worse end of hits to real economic growth.”

“The UK’s current account deficit leaves GBP more vulnerable. Amongst G10 countries, the UK is currently running the worst current account balance.”

“We see a test and breach of the 1.2000 level in GBP/USD as a likely prospect over the short-term.”