GBP/USD has briefly traded above the 1.26 level this morning. However, economists at Rabobank expect the cable to move back lower to retest recent lows.

Higher levels of volatility in FX market ahead

“Signs of weakness in the UK April GDP data, due in the middle of June, or a softening in consumer sentiment surveys are likely to undermine the pound. Simultaneously, fears about slowing growth in China and energy security risks in Europe could bolster safe-haven demand for the USD.”

“In an environment in which the Fed and other central banks are removing liquidity, we expect higher levels of volatility in FX market.” 

“We see risk that GBP/USD could again re-visit its recent lows in the coming months.”