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Sep 19 - 05:00 PM
GBP/USD: Scope For Another Leg Lower Into 1.20; Staying Cautious GBP Through Year-End - CIBC
First appeared on eFXplus on Sep 19 - 03:00 PM

CIBC Research discusses GBP outlook and  maintains a cautious bias on the currency into the year-end. CIBC targets GBP/USD at 1.20 by year-end before rebounding to 1.28 in Q1 of 2020.

"The UK political atmosphere remains febrile ahead of the current October 31st Brexit deadline. Currently, the UK parliament is suspended until October 14th, albeit the legality of the process is due to be tested in the Supreme Court. Additionally, the government has lost is majority after 21 lawmakers were ejected from the Conservative party. Should the Parliament remain closed until October 14th, until a new Queen’s speech, Sterling’s near-term fortunes will remain determined by the market’s assumption of the probability of the government being able to agree a ‘new’ Withdrawal Agreement at the upcoming EU Council meeting on October 17/18," CIBC notes. 

"But deal or no deal, the economic backdrop in the UK will continue to weigh on Sterling in the very near term. Recession risks are elevated as consumer confidence remains compromised and business investment constrained. Signs of a slowdown in the labour market are starting to materialize, as vacancies have retreated to a two-year low and hours worked, often a precursor to job losses, fell. Add to that the risks of an election that markets fear could install an extreme left government, and there are reasons to stay cautious on the GBP through year end even if the PM gets his deal with Europe," CIBC adds. 

Source:
CIBC Research/Market Commentary

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