Credit Suisse Increasingly Confident on GBP/USD Forecast for 1.20
- Written by: Gary Howes
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Content provided by eFXnews
Analysts at Credit Suisse have confirmed to clients that they are confident their forecast for the GBP/USD will be met. Shahab Jalinoos writes:
In the week that has followed, the rate of decline in both pairs puts us well on course to meet these targets.
In the case of GBP, BoE Chief Carney has gone out of his way to both warn of the bleak outlook for the UK economy and to assure markets that the central bank will do everything possible to counteract this with liquidity injections and fresh easing measures.
The market has also taken a clear message that a weaker GBP will be a welcome addition to the list of ameliorative tools available. Indeed, with the UK political establishment in disarray and the wider public mood one of bitterness and recrimination, one of the few sources of agreement seems to be the idea that a weaker GBP is helpful at this time.
We will not go over once again our underlying reasons for GBP weakness based on fundamentals and balance of payments.
Rather, we will emphasise that the monetary policy and political environment that is materialising is supportive of our view.
Importantly, "wishful thinking" ideas popular last week focusing on the possibility of a second referendum or Article 50 never being triggered have taken a back seat given the consistent commentary from leading figures in the ruling Conservative Party arguing in favour of pushing on and implementing the referendum outcome.
Also hurting GBP has been more direct pain in the form of the gating of a number of commercial property funds.
As well as highlighting the worrying possibility of both a property price shock and stretched investor positions in the sector, we note concerns about the exposures of the UK and European banking systems.
Last week our most notable post-Brexit vote forecast changes were to GBP (taking our 3m and 12m GBPUSD targets to 1.22) and USDJPY (moving our 3m target to 100 and 12m target to 95).