The Monetary Policy Committee (MPC) of the Bank of England (BoE) will remain dovish, leaving the door open for negative policy rates and increased QE, with the risk of the former in particular weighing on the pound, according to analysts at Citibank. In the short-term, they forecast GBP/USD at 1.38 in a three month period.
Key Quotes:
“A global economic recovery and broad USD depreciation can see the demand for cheap/value-type assets remain robust in 2021. On this metric, UK equities and GBP both screen well. GBP FX remains around 10-15% cheap based on traditional PPP. That said, the MPC will remain dovish, leaving the door open for negative policy rates and increased QE, with the risk of the former in particular weighing on the currency.”
“GBPUSD have broken through triple horizontal resistance range at 1.3624-1.3657 (double high in Dec 2020 and the Sept 2017 high) to put interim horizontal resistance at 1.3836 as the next line of resistance while near term support is seen at 1.3482-1.3514 (Dec 2019 and Sept 2020 highs) followed by the 55dMA at 1.3308 and the neckline of a potential double top at 1.3188 and at ripple horizontal support range at 1.3100-1.3135.”
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