MUFG Research maintains a bearish and short GBP/USD position targeting a move towards 1.32.
"We recommended a short cable trade idea. Recent price action for the pound has been poor as it has failed to strengthen even as the UK rate market has adjusted sharply to price in more BoE rate hikes into next year. Last week the pound was the second worst performing currency after the yen. According to Bloomberg, the UK rate market is now pricing in the first BoE rate hike," MUFG notes.
"The latest developments are creating a more negative combination of weaker growth and higher inflation in the UK which we believe is a bad mix for pound performance. We expect cable to fall further especially once support at the 1.3600-level is broken," MUFG adds.