Danske Research maintains a bearish bias on GBP over the coming weeks.
GBP was the bigger winner during yesterday's session. This comes after UK chancellor Hunt announced that further elements of the tax cutting agenda will be scrapped as well as shortening the period of universal energy support. The fiscal gap previously estimated at around GBP 65bn is now expected to be reduced to GBP 15bn counting all scrapped measures. With more measures to be announced on 31 October, we expect the fiscal gap to close," Danske notes.
"For us, a key bias through 2021 and especially 2022 has been an emphasis on being long USD and a diverging trend among commodity exporters vs. importers (USD/DM). Amid risk aversion and strengthening dollar, we see a further dimension: tilt towards the managed floats where policymakers lean against FX depreciation," Danske adds.