Analysts at Citibank point out Sentiment remains bullish in sterling with the combination of the most recent (positive) UK COVID developments, a possible Brexit announcement this week (or next) and a less negative rate impetus from the Bank of England together with more fiscal stimulus from the UK government.
Key Quotes:
“There’s no doubt that GBP is cheap based on traditional PPP, which sits around 15% below its long term average. So arguably, despite the fact that the UK has lagged the G10 complex in terms of economic momentum throughout most of the year, the currency has been reasonably supported by its cheap valuation. Going forward, widespread distribution of a vaccine, and an agreement on a Brexit deal can support GBP. A Global economic recovery in 2021 as a result of a vaccine could see the UK begin to catchup. This also reduces the probability of the MPC moving policy rates into negative territory.”
“GBPUSD found support at 100dMA. The pair may challenge 1.3482, with support at 1.2982.”
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