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Scotia Bank forecast
Beyond the stagflation risk, the GBP will not react well to renewed equity market weakness as central banks persist with interest rate increases
the domestic political backdrop remains unhelpful (a new PM, Brexit issues unresolved and independence movements at home stirring again)
broad, trade-weighted index (TWI) measure of the pound could fall another 4-5% broadly or so before reaching the lows seen around the 1992 Exchange Rate Mechanism debacle, the 2008 financial crisis, the 2016 Brexit vote and the 2020 pandemic
The fact that broad TWI losses stalled around 73.5 on each of those very different calamities for the pound suggests it is a point worth keeping a close eye on moving forward.
A return to that point in this cycle might imply — roughly — downside risks for GBP/USD to the 1.10 zone and upside risks for EUR/GBP to the 0.90 area in the next few monthsUSD/JPY continued its rise through the session, hitting a high 20 year high above 139.68 as the yield on 2-year US Treasuries rose to its highest since 2007, providing a nice tailwind to the USD Yield circa 3.5%.
After having a breather in July the #USD surged in August getting a lift from Yields, forwards and safe haven flows.
#GBPUSD worst performer with stagflation and ouster of Boris Johnson
#USDJPY hit a 20 yr high as the JGB/TNX spread widenedForex Weekly Analysis and Outlook – US Dollar, Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar,
[See the full post at: Forex Weekly Outlook – Geopolitics and Dollar Pushes Euro and Yuan Through Extremes]
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