GBP/USD: Long with a target at 1.35 – CitiBank

Analysts at Citibank point out that a strong fiscal and monetary stimulus support from the UK government and the Bank of England later this year and movement towards a Brexit deal should all be further supportive of the pound over the medium term.They see GBP/USD trading at 1.30 on a 0-3 month horizon and at 1.33 on a 6-12 month forecast. 

Key Quotes:

“The UK government’s fiscal response to the COVID-19 outbreak is already by far the country’s largest in modern peacetime history. However, in conjunction with the reluctance of the MPC to currently provide significant additional QE, the Gilt curve may come under persistent upward pressure over the medium term. Higher yields caused by increased fiscal risk will likely weigh on the Pound. Besides, economic data momentum indicators still suggest the UK is lagging behind many other G10 countries, and it faces some additional hurdles which could slow it down even more (Brexit uncertainty/negotiations).”

“GBPUSD’s price action in the last 2 weeks now looking very like that seen mid-July before GBPUSD broke higher again. We are long the pair with target 1.35. Good support is seen at 1.2981 with a more solid floor at 1.2790-1.2810.”