GBP/USD: Target at 1.3500 by October, unchanged – CitiBank

Analysts at Citibank, point out that with the resilience of economic data from the United Kingdom proving to be a positive surprise, combined with ongoing fiscal and monetary stimulus and tailwinds from initial reopening, their target in GBP/USD at 1.3500 by October, is unchanged. 

Key Quotes:

“Fed Chair Powell announced that Fed does shift to a flexible target 2% on average inflation and also states that low unemployment in the absence of inflation should not imply more hawkish policy. The dollar rebounded only briefly, and then softened again.”

“The UK government’s fiscal response to the COVID-19 outbreak is already by far the country’s largest in modern peacetime history. However, in conjunction with the reluctance of the MPC to currently 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. Besides, economic data momentum indicators still suggest the UK is lagging behind many other G10 countries, and it faces some additional hurdles which could slow it down even more (Brexit uncertainty/ negotiations).”

“GBPUSD breached 1.3200-32 and may test higher to 1.35+, with support at 1.2982 and 1.3200.”