GBP/USD: Not ruling out a move to parity – Rabobank

The pound remains a very vulnerable currency according to analysts from Rabobank. They have a 3-6 month target of the GBP/USD pair at 1.04 and they cannot rule out a move to parity dependent on the decisions taken by the UK government.

Key Quotes: 

“The ferocity of the market reaction which greeted the Chancellor’s mini-budget on September 23 has triggered a broad range of criticisms.  Among them is the accusation that the Chancellor and his advisers naively failed to read market conditions.  UK economic fundamentals have been souring for some time and GBP has been performing poorly for a while, not just against the mighty USD but against the beleaguered EUR too.”

“The signals from the budget imply that the UK government has put a low priority on fiscal prudence clearly pushed the market’s patience over the edge. While GBP/USD has scrambled back above the 1.10 level following intervention from the Bank of England, we continue to view the pound as a very vulnerable currency.”

“While the BoE’s fire-fighting policies can hold the market fairly steady for now, without some change in the government’s fiscal position, the pound is on borrowed time. We have a 3-6 month target of GBP/USD1.04 and cannot rule out a move to parity dependent on the direction of UK fiscal policies.”