Scotia with the forecasts. Analysts at the bank citing:
- Beyond the stagflation risk, the GBP will not react well to renewed equity market weakness as central banks persist with interest rate increases
- the domestic political backdrop remains unhelpful (a new PM, Brexit issues unresolved and independence movements at home stirring again)
- broad, trade-weighted index (TWI) measure of the pound could fall another 4-5% broadly or so before reaching the lows seen around the 1992 Exchange Rate Mechanism debacle, the 2008 financial crisis, the 2016 Brexit vote and the 2020 pandemic
- The fact that broad TWI losses stalled around 73.5 on each of those very different calamities for the pound suggests it is a point worth keeping a close eye on moving forward.
- A return to that point in this cycle might imply — roughly — downside risks for GBP/USD to the 1.10 zone and upside risks for EUR/GBP to the 0.90 area in the next few months
Cable weekly bars.
gbpusd 3date 01 September 2022
