MUFG Research discusses GBP outlook and maintains a cautious bias in the near-term.
" The GDP report confirmed that the UK economy has been one of the hardest hit by the negative COVID shock as it contracted by a record -20.4% in Q2. It was marginally better than the BoE’s forecast for a contraction of -21% although that provides little comfort. More encouraging was the stronger than expected recovery in recent months," MUFG notes.
"An antibody test of more than 100k people in the UK estimates that only around 6% of the population have had COVID-19 although it is as high as 13% in London. In addition, the risk of further Brexit uncertainty poses downside risks to the recovery later this year.
In these circumstances, we continue to maintain a cautious outlook for the pound even after the BoE’s decision to dampen negative rate expectations which has has helped ease downside risks in the near-term," MUFG adds.