GBP/USD: Dollar may remain strong in short to medium term – CitiBank

Analysts at Citibank point out the GBP/USD could bounce above 1.2750 if it consolidates in the support of 1.2382. 

Key Quotes:

“The Bank of England kept all policy settings unchanged. In case of a smooth Brexit process (deal) and some recovery in global growth, the MPC expects to hike interest rates “at a gradual pace and to a limited extent”.

“Although the Fed cut rate by 25bp as expected, median dots now suggest no further cuts in 2019 and 2020. Dollar bounded while GBP drop.”

“MPs have voted against leaving on Oct 31 without a deal. We think the lows may be in for GBP in 2019, particularly with other CBs easing. Besides, other bearish GBP catalysts have moderated. Labour now supports a second EU referendum and heavy reliance on the Liberal Democrats would limit the scope for radical policies.”

“GBP/USD pair’s upward momentum is slowing down and reach the resistance at fibo 0.764. The pair may rise to 1.2784 after consolidation with support at 1.2382.”

“The chance for the Brexit deal increase in 2020. BoE may turn to hawkish. GBP may break 1.25 and move even higher to 1.40 level.”