GBP/USD could inch close to parity by year-end – ING

GBP/USD is approaching the 1.10 level. In the view of economists at ING, heightened scrutiny on policy choices can see GBP/USD nearing parity later this year.

Cable does not seem out of the woods yet

“It looks like the Fed will be pushing real interest rates deeper into more restrictive territory over coming months. That will tighten liquidity conditions still further and see that any policy mistakes get punished. The new UK government admitted such a policy mistake when reversing plans to scrap the top rate income tax bracket. The UK Gilt market was just not ready for huge supply.”

“Key dates for the diary are 14 and 31 October. The BoE intervened to buy Gilts but said it would stop on 14 October. Does the Gilt market allow that to happen? And 31 October sees the medium-term fiscal plan released. Do the numbers add up?”

“GBP/USD: 1M 1.07 (1.1085) 3M 1.02 (1.1098) 6M 1.02 (1.1089) 12M 1.11 (1.1038).”