GBP/USD risks a deeper decline in the near term, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is room for GBP to move below 1.2000 but any weakness is viewed as part of a lower trading range of 1.1980/1.2060’. We did not anticipate the elevated volatility as GBP dropped to 1.1962, rebounded sharply to 1.2095 before closing at 1.2050 (+0.23%). The price movements are likely part of a broad consolidation range. Today, we expect GBP to trade between 1.2000 and 1.2110.”

Next 1-3 weeks: “Our update from two day ago (06 Feb, spot at 1.2050) is still valid. As highlighted, further increase in downward momentum suggests more GBP weakness but it remains to be seen if the significant support at 1.1845 will come into view. Overall, only a breach of 1.2150 (no change in ‘strong resistance’ level) would indicate that the weakness in GBP that started late last week (see annotations in the chart below) has run its course.”