GBP/USD: Buying point at 1.2580 – TDS

Analysts at TD Securities review the sterling outlook with the EU-UK negotiations on the horizon. They are optimistic in the long-term for the pound so recommend to buy the cable at 1.2580 seizing declines due to Brexit tensions. 

Key quotes

“We think tensions between the EU and UK are likely to escalate over the next few months. Here, we think the risks of a breakdown in negotiations by April is a very real possibility. Unsurprisingly, we think investors would view such a breakdown in discussions as a significant risk factor for the GBP.”

“We think the UK economy may struggle to counter difficulties. With this in mind, we continue to look for the BoE to deliver a 25bps rate cut in May.”

“We think GBP/USD is likely to have a better second half of 2020. Indeed, we retain our current target of 1.40 for year-end, although we do see some downside risks to this amid a still-strong USD overall. In line with this, we think the decline in the cable we anticipate as a result of these tensions could provide an attractive entry point for strategic longs. Here, we think the 1.2580 pivot could be an area of notable buying interest.”