Credit Agricole CIB FX Strategy Research comments on GBP direction in the aftermath of the UK elections which have resulted in a hung parliament and sent GBP tumbling in the immediate aftermath of the vote.
“A look at May 2010, the last time we had a hung parliament, would suggest that the drop in the currency may have further to go. The approaching Brexit negotiations will only complicate the GBP-outlook.
While coalition talks seem to be already underway, downside risks for GBP could persist in the near-term as uncertainty about the future government and, by implication, the UK’s Brexit strategy lingers…The fact that investors have unwound their shorts does not help GBP,” CACIB argues.
“We expect GBP/USD to revisit its lows around 1.25 while EUR/GBP could test the highs around 0.90. Subsequently, we will be reviewing our near-term forecasts,” CACIB adds.
GBP/USD is trading circa 1.2795 and EUR/GBP is trading circa 0.8795 as of writing.
Source: Credit Agricole CIB Research
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