GBP/USD seen at 1.21 at year-end - Scotiabank

Eric Theoret, Strategist at Scotiabank, notes that they expect GBP further weakness and hold a year-end forecast of 1.21 for Cable.

Key quotes

“GBP is a notable underperformer, weakening through both the Asian and European sessions in direct opposition to the broader G10 group. Modest GBP weakness followed the release of softer than expected CPI data for October (0.9% y/y vs. 1.1% exp.) and pressure was added by comments from BoE Gov. Carney as he pushed back on BoE criticism regarding inequality while highlighting the impact of uncertainty on business investment.”

“The 2Y U.K.-U.S. yield spread remains a drag and the outlook for relative central bank policy remains bearish for GBP. We look to GBP weakness and hold a year-end forecast of 1.21.”

“GBP/USD short-term technicals: neutral—GBP appears to have faded its recent rally with a return to last week’s congestion around 1.24. 50 day MA resistance (1.2635) has been reinforced and GBP has softened through its 9 day MA (1.2468) with risk to the 21 day MA at 1.2338.”