Credit Agricole CIB Research discusses GBP/USD outlook and targets the pair at 1.35 over the coming 3-months.
"Growing UK vaccine rollout and escalating post-Brexit tensions with the EU to cloud the UK economic outlook even after lockdown conditions are lifted in Q2. The US economy to boom in Q2.
The GBP/USD rally contributed to the more aggressive tightening of the UK financial conditions relative to the US. This could make the BoE more dovish than the Fed," CACIB notes.
"Our analysis suggests that overvalued GBP/USD (G10 VALFeX fair value of 1.3450) could be one of the best G10 FX hedges against the twin risks of elevated UST yields and risk aversion in Q2," CACIB adds.