A view on the UK pound citing, amongst other factors, the seemingly deadlocked EU-UK trade talks.
Bank Of America looking for GBP to decline through to the end of this year on:
- "stuck in the mud" Brexit negotiations
- softer monetary policy
- seasonal underperformance, say that GBP trade-weighted index has on average underperformed in 4 out of 5 months August to December since 2004
BoA say they do not accept that GBP is significantly undervalued. Look for further weakness mostly in:
- GBP/CHF
- EUR/GBP
Forecasts:
- EUR/GBP at 0.92 by year-end
- GBP/USD at 1.17
"While a no-deal would have the most immediate macro and FX impact (1.10 in GBP/USD; 0.95+ in EUR/GBP), a bare-bones trade deal would mean a bleed lower in GBP over the course of 2021"
