Cable is expected to depreciate further in the next months, although it is seen returning to the 1.20 neighbourhood in Q3/Q4 2020, according to strategists at UOB Group’s Quarterly Global Outlook.
Key Quotes
“GBP/USD has dropped from 1.28 at the start of March to 1.15 by the third week ofMarch, surpassing the 1.20 low reached during the depth of the Brexit negotiations last September and for its lowest since 1985. The cliff-edge drop puts the GBP as one of the most oversold currencies in the G-7 Majors space”.
“That said, strong USD demand is likely to persist in the coming months, pinning GBP/USD at multi-decade lows. Similar to EUR/USD, whilst we expect a 2H20 recovery for GBP/USD, the trajectory is likely to more modest, further weighed by uncertainties over the Brexit transition”.
“Overall, our updated GBP/USD forecasts are 1.15 in 2Q20, 1.17 in 3Q20, and 1.20 for both 4Q20 and 1Q21.”