GBP/USD: Large current account deficit to weigh on Sterling – ING

GBP/USD fluctuates below 1.2100. Economists at ING expect Sterling to remain under pressure amid prospects of recession.

GBP/USD gains will not last

“Three-month GBP/USD traded volatility prices are now under 12% having been near 19% in late September. Clearly, Sterling trading conditions have settled down even as recession expectations solidify.”

“Our view is that these GBP/USD gains will not last and we would not be surprised to see fresh selling interest emerging near the 200-Day Moving Average at 1.2177 or at best the 50% retracement of the 2021-22 drop – at 1.2300.” 

“The current inversion in yield curves around the world does, for a change, look to be a likely harbinger of recession. And with its large current account deficit, Sterling should be expected to remain vulnerable.”