Further decline in GBP/USD remains in store as long as it trades below 1.2500, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We did not anticipate the increase in volatility as GBP plummeted to 1.2373 and then snapped back up to the day at 1.2416 (-0.15%). The sharp rebound from the low suggests GBP is unlikely to weaken much further. Today, GBP is more likely to trade in a range between 1.2385 and 1.2465.”

Next 1-3 weeks: “Two days ago (22 May, spot at 1.2460), we highlighted that downward momentum has slowed but only a clear break above 1.2500 would indicate that the GBP weakness has come to an end. Yesterday, we indicated that ‘if GBP breaks below 1.2390 in the next couple of days, the next level to watch is 1.2350’. In London trade, GBP broke below 1.2390 in London and then rebounded strongly from 1.2373. Despite breaking 1.2390, there is no clear increase in momentum. That said, the downside risk remains as long as GBP does not break above 1.2500.”