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GBP/USD – Run on the Pound unlikely

FX_IDC:GBPUSD   POUND STERLING / US DOLLAR
How low the British Pound can go?

Major investment banks are calling for a drop to 1.20 levels by turn of the year. A significant minority also expects Pound to rally to 1.39-1.40 levels over the next six months or so.

Jeremy Stretch, Head of G10 FX at CIBC was on our Finance Show today explaining why he believes Cable could go down to 1.25 levels, but a run on the Pound is unlikely

We have heard the phrase run on the bank….Run on the Pound is a crash like sell-off. Stretch believes – “Question is what will be the next catalyst for a fresh sell-off in Pound. Markets believe BOE would do more expansion of its balance sheet so it could trigger some fall. Further bearish pressure could come as we move from survey data due to actual data – retail sales, trade balance, industrial production, labor data. So Cable could go down to 1.25, but don’t see capitulation of Pound.”

Watch our segment with Jeremy Stretch title “Interest rate cut strategy nearing end game, run on pound unlikely – CIBC” here - https://www.youtube.com/watch?v=Oz9dMzmkWUA

Technicals

Monthly chart looks scary…we have a large multi decade head and shoulder breakout, however, the money flow index is down to 30 levels. Over the last 40 years or so, money flow indicator fell below 30 only thrice. Other times, it recovered from near 30 levels, which means the Pound could go higher from here.

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