I expect GBP to lose relative strength in the coming year, and i have lowered my forecasts, especially for GBP/USD. I see potential for a decline to 1.45 during 2015. GBP is set to face a fresh set of challenges in the coming year, including a moderation in the growth outlook, increased political uncertainty surrounding the general election and the prospect of another round of fiscal consolidation. Politics and the fiscal position will be significant risk factors for GBP in 2015.
Being bearish GBP/USD is one of my top trading ideas for 2015 – targeting the 1.45 area
For 2014, I had held a relatively positive GBP view on the crosses, forecasting a EUR/GBP decline. This view has played out well, with EUR/GBP falling 5.5% year-to-date as of the time of writing, despite GBP/USD also declining in the second half of the year as a result of a strong USD. We now see GBP’s performance on the crosses as more restricted than initially assumed, with the pace of the EUR/GBP decline likely to slow over the coming year. EUR/GBP downside is likely to be limited to the 0.7500 area in 2015,
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