GBP/USD: Recent Gains A Selling Opportunity
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GBP weakness appears set to resume in August as we look to widening (negative) interest rate differentials on the back of well-communicated and widely-anticipated BoE easing (25bpt rate cut, 50bn QE), cementing a theme of policy divergence relative to the Fed.
Downside risk is elevated as we look to the post-referendum low around 1.28 and note the absence of any meaningful support ahead of the February 1985 low near 1.05.
We hold a Q4 2016 GBP target of 1.25 and highlight the potential for an overshoot...We think modest GBPUSD gains are an opportunity for sellers.
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