The oversold pound has faced a strong rebound this week, recouping some of its recent sharp losses as global risk appetite improved. However, economists at ING expect GBP/USD to move below the 1.25 level in the coming months.
“While the good GBP momentum may continue as equities find some stability in the coming days, the pound still faces two major downside risks in the coming months: a) a further dovish repricing of BoE rate expectations (the implied rate for end-2022 is still 2.0%); b) Brexit-related risk, as the unilateral suspension by the UK of parts of the Northern Ireland agreement would likely trigger a trade war with the EU.”
“We think cable will mostly trade below the 1.2500 mark during the summer.”
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