Gbpusd Will Likely Find Support Lower

 Gbpusd Will Likely Find Support Lower

GBP/USD Will Likely Find Support Near 1.2037 - MUFG

The meeting of the BoE is just around the corner (a few days left), and it seems that the MUFG analysts have come up with a forecast for the GBP/USD.

According to MUFG, the GBP/USD pair will likely go down and find support near the 1.2037 level. As for the reason behind this bearish forecast, the MUFG cites the weak economic activity in the UK.

They added that the data coming from the UK continues to get worse with no end in sight. That's why it should be no surprise if the BoE also acknowledges the current economic situation of the country.

UK's Economic Data Stays Weak

At the same time, wages in the UK will also decline further due to the conditions of the labor market. In a sense, lower wages will also help control inflation, but let's not forget that it will lead to lower economic output as well.

That's why the MUFG believes that the forecast of a 25 basis points rate cut is just a starting point. According to them, the actual rate cuts introduced by the BoE will be far higher than that by the end of Q3 2024.

If the upcoming BoE meeting is less hawkish, it will send the yields of UK bonds lower as we approach the end of 2023. So, that's another factor that will force the GBP to underperform.

Given this backdrop, it makes sense for the pound and dollar currency pair to turn lower and find support near 1.2037. Since this level is also the low of October 2023, it will hold the sellers and serve as a base for the buyers.

Next up is the 1.2000 level, which is also a major support zone. In fact, it will be more important than the 1.2037 and is also 37 pips away.

However, a bullish surprise from the BoE (Bank of England) means the GBP will strengthen against its counterparts like the Dollar and the Euro.

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