GBP/USD looks set to slide for a retest of the 1.20 area - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the UK’s pushback from a specific date for achieving a balanced budget has seen IFS’s forecast for ‘balance’ pushed into 2020-21 before the Autumn Statement.

Key Quotes

“Details are still to emerge, but it seems highly likely that Chancellor Hammond’s hopes for a sober statement will fail to avoid larger deficits. The PM’s office insistence on measures to assist JAMs (Just About Managing households), infrastructure initiatives, income pressures and possible increases in EU payments (due to GBP’s slide) all look set to increase the budget deficit.”

“Brexit negotiations appear to be getting more acrimonious and “harder” which will increase uncertainty pressures on GBP. Positioning risks have been reduced by recent GBP rebounds and both budget and Brexit pressures should see the 1.26 area cap further attempts to rebound. GBP/USD looks set to slide for a retest of the 1.20 area.”