GBP/USD: We favor stabilization over the near term - Lloyds
Analysts from Lloyds Bank, favor a stabilization in theGBP/USD pair over the near term and they expect it to rise toward fair value around 1.47 by end-2016.
“We forecast GBP/USD to move back towards fair value, around 1.47, by end-2016”
“Having briefly fallen below 1.39 in late February, GBP/USD has been supported by relatively firm UK data. GDP for Q4 was revised higher, UK employment and retail sales both outperformed expectations. Meanwhile, relatively dovish comments from Fed Chair Yellen briefly drove the currency pair above 1.4450.”
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“However, selling pressure on GBP/USD resumed, amid concerns over the deteriorating current account deficit, ongoing uncertainty associated with the EU referendum and growing market expectations of further policy easing from the BoE.”
“On balance, we favour GBP/USD to stabilise over the near term, particularly with long term support - between 1.38 and 1.35 (which has held since 1985) - relatively close. Beyond the uncertainty of the coming months, we expect the pair to rally back towards fair value around 1.47 by end-2016, primarily because we anticipate the BoE will begin to raise interest rates in Q4-2017, well in advance of what is implied by the market.”
