Largest asset manager in Europe bets on GBPUSD decline

26 December 2023 147
Largest asset manager in Europe bets on GBPUSD decline

Over the last week, the GBPUSD currency pair has slightly retreated from the 4-month highs set just below the 1.28 level. In general, the medium-term trend for the pound's strengthening against the dollar remains, but the pace of the quotes' rise has significantly slowed down by now. There are long shadows of candlesticks above the 1.275 level on the daily chart, which is a signal of mass profit-taking and shifting to short positions. Not only private traders, but also large institutional investors act in this way.


Federico Cesarini from Amundi Investment Institute, the research department of Europe's largest asset manager, reported a negative outlook for the pound. According to his forecast, the exchange rate of the British currency against the dollar will drop by 4% to the 1.21 level by the end of March 2024. At the same time, the average market expectations are reduced to the 1.25 level, which is also lower than the current GBPUSD quotes.


According to Cesarini, the current negative dynamics of UK GDP is far from the worst. In his view, the strong pressure of high interest rates on the UK economy will also cause an active decline in inflation. As a result, normalized price growth could allow the Bank of England to ease monetary policy in May. In earlier forecasts, it was expected in August.


Amundi analysts expect a technical recession in the UK by the end of Q4 2023. In their opinion, the current GBPUSD rate does not include a high probability of economic crisis. In this regard, Amundi believes it is reasonable to open short positions on GBPUSD. According to analysts' estimates, some recovery of the British currency can be expected only by mid-2024.


In case of GBPUSD growth to 1.275, opening short positions looks interesting. The level of 1.264 may serve as a short-term target for the bears. This scenario will no longer be relevant if the price consolidates above 1.28.

 


Consider the following trading strategy:


Sell GBPUSD in the range of 1.27–1.275. Take profit — 1.264. Stop loss — 1.28.


Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion

This content is for informational purposes only and is not intended to be investing advice.

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