BULLISH –OPTIMISTIC FOR A BREXIT SOLUTION ( OR DELAY)
GBPUSD to rally to 1.3200-1.3450-1.3600 as USD weakness and cheap valuation trumps Brexit fears. We have a bullish view on the GBP in the long term(12 months) and a range-bound view in the short term (3 months) based on a relative rate differentials, valuations and Brexit challenges . Brexit will continue to be a key driver for GBPUSD. Both the UK and the EU will likely to be motivated to compromise , and we expect an eventual broad agreement that could be refined post-Brexit, or as a last resort, another extension of the “hard” deadline. PM Johnson’s strong parliamentary majority is likely to be an asset as the UK negotiates a Brexit deal. Monetary and Fiscal Policy has been supportive of the economy and is likely to remain so . Within the context pf a medium- term USD downtrend , we believe that Long-lasting GBP undervaluation will allow GBPUSD to rally above 1.3100. Brexit and a second pandemic wave are risks to our bullish long-term view.
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