Analysts at Rabobank see risks of a decline in the GBP/USD pair to 1.20 this year, based on their view that further bouts of Dollar strength are likely.

Key quotes: 

“In our view, a move in cable above the 1.26 would likely have to be initiated by further broadbased USD weakness. The market is putting distance between itself and last month’s banking sector jitters.”

“The cautious recovery in sentiment has pushed against the safe haven USD which has also being undermined by market optimism that the Fed may be cutting interest rates before the end of the year to soften recessionary risks. While the USD may retain a softer profile nearterm we see risk of further bouts of USD strength this year.”

“We cannot rule out the risk of further choppy conditions in the USD’s outlook and for choice we maintain the view that the USD will strengthen on a 6 month view. This suggests risks of a drop in cable back to the 1.20 area this year.”