GBP/USD: SEB thinks pound is undervalued, most of the decline is behind us

Today, SEB warns traders regarding the GBP/USD, considering that most of the decline is behind us:

"The 4 August decision by the BoE was more dovish than expected and triggered a new wave of a declining GBP. Furthermore, although the impact of the vote Brexit remains very uncertain, estimates point to a potential UK recession in the second semester.

As such, the GBP/USD lost about 18% since last year, and most valuation models a starting to indicate a severe undervaluation.

We therefore believe that the bulk of the downward potential is behind us, but on the other hand, a genuine rebound remains unlikely as long as uncertainty about the consequences of Brexit has not been lifted.

Finally, with regard to our forecasts, we expect that a GBP/USD at 1.26 at the end of Q3 and at 1.27 at the end of 2016."