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31 Mar 2015
GBP/USD likely to remain in the low 1.40’s for most of 2015 – BAML
FXStreet (Barcelona) - With election uncertainty set to drive GBP in the near-term, Kamal Sharma, FX Strategist at BofA-Merrill Lynch, believes policy divergence will keep GBP/USD near low 1.40s for most of 2015 and push EUR/GBP towards 0.70 by 2015-end.
Key Quotes
“A confluence of factors has served to undermine GBP sentiment through the past month. The most significant of these has been the sharp slowdown in official sector buying of GBP.”
“These flows had been particularly strong heading into 2015 as reserve diversifiers scaled out of Euro Area government bonds and into UK gilts ahead of the ECB QE program.”
“With positive UK data surprise momentum also stalling, comments from Bank of England members on the disinflationary impact of GBP strength have also served to undermine currency sentiment.”
“With the upcoming May 7th General Election also on the horizon and still no clarity from the opinion polls, GBP weakness is likely to persist over the near term.”
“Furthermore, though GBP volatility has already reacted to the prospect of a hung parliament, we see little reason to suggest that such risk premium will be readily priced out in the run up to the election.”
“We expect the election uncertainty to continue to weigh on GBP over the near-term but provided some clarity is achieved in the months following the election, our framework of policy divergence will push EUR/GBP back towards 0.70 towards the end of the year.”
“GBP/USD is likely to trade in the low 1.40’s for much of the year”
Key Quotes
“A confluence of factors has served to undermine GBP sentiment through the past month. The most significant of these has been the sharp slowdown in official sector buying of GBP.”
“These flows had been particularly strong heading into 2015 as reserve diversifiers scaled out of Euro Area government bonds and into UK gilts ahead of the ECB QE program.”
“With positive UK data surprise momentum also stalling, comments from Bank of England members on the disinflationary impact of GBP strength have also served to undermine currency sentiment.”
“With the upcoming May 7th General Election also on the horizon and still no clarity from the opinion polls, GBP weakness is likely to persist over the near term.”
“Furthermore, though GBP volatility has already reacted to the prospect of a hung parliament, we see little reason to suggest that such risk premium will be readily priced out in the run up to the election.”
“We expect the election uncertainty to continue to weigh on GBP over the near-term but provided some clarity is achieved in the months following the election, our framework of policy divergence will push EUR/GBP back towards 0.70 towards the end of the year.”
“GBP/USD is likely to trade in the low 1.40’s for much of the year”