GBP/USD: Political risk underpinning sterling weakness - CIBC

Analysts at CIBC, see the Pound rebounding over the next months on the back that some kind of agreement between the UK and the EU will be reached. They forecast GBP/USD at 1.33 in Q3 and at 1.41 in Q1 2020.

Key Quotes: 

“In spite of continued political uncertainty, the UK economy remains fairly solid, as the BoE has upgraded its GDP forecasts. Barring the possibility of a hard Brexit, BoE Governor Carney has warned that rates in the UK should be higher than what the market has currently priced in, but for now, the market is currently preoccupied with political risk rather than fundamentals.”

“GBP has come off the 1.32 mark over the past few weeks, and there are signs that levels are a bit oversold. Handicapping Brexit is an impossible task, but our current assumption is that an accord with the EU will somehow be reached which supports an upward profile in GBP.”