GBP lacks any catalyst for a significant bounce – its likely to fall to 1.25

A client note late last week via Société Générale on their outlook for sterling.

In summary:
  • Bank of England gave a strong indication of negative rates coming early 2021, if combined with a no trade deal Brexit could prompt drop for GBP
  • GBP is already weaker than relative growth might suggest, or than relative rates might warrant
  • GBP continues to lack any kind of catalyst for a significant bounce
  • GBP/USD likely to fall 1.25 in Q1 2021
  • EUR/GBP to 0.96 in Q1 2021, to 0.94 in 12 months
SG say they favour shorting GBP/JPY
SG note there is support for GPB :
  • biggest source of support is that it is already so cheap and sentiment is already so bearish
  • as well as the economic and political outlook