GBP/USD: Tactically bullish on sterling as Brexit deal optimism has likely further room to run – CitiBank

The GBP/USD pair may drop in the short-term, notes analysts at CitiBank, but the area around 1.2438 could represent a buying opportunity. They forecast the pair at 1.27 on a three-month horizon. 

Key Quotes:

“The UK’s fiscal response to the COVID-19 outbreak is already by far the country’s largest in modern peacetime history. Given the level of issuance on the horizon, in conjunction with the reluctance of the MPC to provide significant additional QE, the Gilt curve may come under persistent upward pressure over the medium term. Higher yields caused by increased fiscal risk will likely weigh on the Pound. We also expect the UK to lag behind many DM countries throughout 2020-2021.”

“GBPUSD may head lower in the very short term, having failed to overcome the 76.4% pullback level and 200 day MA (1.2678-1.2701) and having posted a bearish outside day with daily momentum has also crossed lower. But we see buy levels around 1.2438 ( 55 day MA and horizontal support).”

“We turn tactically bullish on sterling as Brexit deal optimism has likely further room to run.”