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Bank of America: GBP Will Rise in 2021

Bank of America: GBP Will Rise in 2021

Updated

The British pound has advanced in the first half of the year, especially against the euro. Will this trend sustain in the second part of 2021?

Bank of America has published its mid-year forecast on the GBP. The bank believes the pound has more room to rally up further. The reasons are the UK's successful vaccination rollout and the Bank of England hawkish pivot. The BoE is likely to raise interest rates in 2022, ahead of many G10 peers.

The group of Ten (G10) is made up of eleven (yes, it’s strange) industrial countries (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States) that meet on annual basis to consult each other and cooperate on international financial matters.

According to Bank of America, the British pound will mostly outperform the Japanese yen and the Swiss Franc - both currencies with ultra-low interest rates. Besides, the UK PM Boris Johnson claimed that he would cancel the coronavirus restrictions, which would be positive for the pound.

Technical outlook

EUR/GBP has bounced off the 50- and 100-day moving averages and reversed to the downside. The move below the low of June 24 at 0.8530 will press the pair down to the next round number at 0.8500. The pair is likely to move down in the mid and long term. Still, if some fundamentals shock the markets and the pair breaks above the upper trend line at 0.8600, it may jump to 0.8650.

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