GBP/USD set to test the 1.20 level – ING

GBP/USD looks on track to test the 1.2000 support level, economists at ING report.

1.2000 in sight

The GBP/USD 2-year swap rate gap has shrunk to only 17 bps – from a 135 bps peak in July – after the combined effect of a hawkish Fed and dovish Bank of England repricing. That swap rate gap is consistent with GBP/USD trading around current levels and a break below 1.2000 would not be an aberration compared to recent history. 

Should we see the 1.2000 support collapse, the 1.1830 March low is the next support level to watch.