ANZ Research discusses GBP outlook into 2021 and targeting GBP/USD at 1.36 by end of Q1 ahead of 1.40 by end of 2021.
"Optimism is skewed towards the UK and EU reaching a trade deal, but the familiar hurdles around fisheries and level-playing-field arrangements persist. Sterling may experience a relief rally if agreement is reached, but we anticipate the GBP’s upside is now more constrained than it would be under a comprehensive economic accord. Much of GBP’s projected rise vs USD next year is down to USD weakness," ANZ notes.
"Although welcome, a narrow trade deal will inevitably result in heightened trade friction, which will weigh on growth as the economy adjusts. We look for GBP/USD to move towards 1.40 but remain below its post ERM average of 1.58," ANZ adds.