GBP/USD: UK policy response will likely cap significant gains for the pound – CitiBank

From a technical perspective, analysts at Citibank, argue the GBP/USD pair is probably on its way to higher levels to test 1.3285 and 1.3482. Over a 0-3 month horizon, the see GBP/USD at 1.27, and their 6-12 month forecast stands at 1.33. 

Key Quotes:

“GBP is cheap, which sits around 15% below its long term average. Despite that the UK has lagged the G10 complex in terms of economic momentum, the currency has been reasonably supported by its cheap valuation. However, it is the policy response to the poor economic momentum that will likely cap significant gains for GBP in
the medium term. Citi forecasts the MPC to cut into negative territory in mid-2021.”

“GBPUSD broke the resistance at 1.3150, which may open the way to test higher at 1.3284 and 1.3482, with support at 1.2910 (100dMA).”