GBPUSD has dropped below 1.12. Economists at TD Securities expect the pair to challenge the 1.10 level.

Increasingly difficult to justify holding GBP

“The BoE is doing GBP no favours and clearly is less resolute to fight inflation than the Fed. With the change in government helping to reduce the risk premium around the UK, broader forces are becoming more important for GBP, much of which are US-centric. Those are likely to intensify in favour of the US unless data weakens.”

“We are left with the bias that a move back to 1.10 in Cable is in the offing in the very near-term.”

“For now, we think newfound USD strength will be an important force in restraining a surge higher in EURGBP. But, all bets are off if 0.8730 fails to hold, in which case 0.88+ is in the cards.”