GBP/USD failed to stage a convincing rebound on Tuesday but trades in positive territory above 1.31 early Wednesday. But if the pair fails to move beyond the 131.50/80 area it would be at risk of suffering substantial losses toward 1.2850, economists at ING report.

Recession risks growing

“High energy prices are increasing the risks that the UK goes into a technical recession in the third and fourth quarters of this year. While these fears may be negative for GBP over the longer-term (and we do favour EUR/GBP higher next year), a hawkish Bank of England and a flatter or even inverted yield curve would probably keep GBP bid.”

“EUR/GBP can probably head back below 0.8300 again near t-term.”

“Cable is clinging onto support above 1.3100, but failure to move through the 1.3150/3180 area leaves it vulnerable to 1.2850 on renewed dollar strength.”