– GBP weakness has been one of the dominant themes of 2013 with reduced safe haven demand due to improving euro area sentiment and weak UK cyclical data.
– While we had expected GBP/USD to move lower over 2013, the aggressive nature of the sell off suggests that any further weakening is likely to be at a slower pace. We now forecast GBP/USD to move to 1.57, 1.56, 1.55 and 1.53 in 1, 3, 6 and 12m respectively.
– EUR/GBP has strengthened significantly and we do not believe current levels are justified by fundamentals. There is a lot of positive news price into the EUR while expectations for UK growth are much lower.
– Either a re-emergence of EA issues or upside surprises in the EA with positive knock-on effects on the UK should drive EUR/GBP lower. We forecast 0.88, 0.87, 0.85 and 0.83 in 1, 3, 6 and 12m respectively.
Click here to read the full report: Technical Research
Barclays Capital