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Barclays sees downside in the pound
Barclays Research discusses GBP outlook and adopts a structural bearish bias, expecting the pair’s to trade lower towards 1.25 by year-end and at 1.22 by Q1 of 2020.
“We are turning increasingly more bearish on the GBP because
Brexit-induced political and business uncertainty is likely to cap any
upside for the pound.
EURGBP will likely further appreciate over the coming quarter
as markets re-assess the risks associated with a no-deal Brexit. While
we still envision a deal by year-end, our conviction is generally low.
The domestic economy is already slowing, as is the previously resilient
UK labour market, a view already shared by some MPC members. Moreover,
the weak global backdrop is unlikely to provide much support to the
pound either and is making the MPC’s current stance hard to justify,”
Barclays notes.
“Risks to our GBP forecasts skew to the downside and
can materialize either from a realisation of a no-deal Brexit or
further delays in the process, with associated increased uncertainty
related to an early election or second referendum,” Barclays adds.
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