GBP/USD outlook to be dominated by political uncertainty - Rabobank

In view of Jane Foley, Senior FX Strategist at Rabobank, while disappointment over the pace of reflation and Fed tightening would be a setback for the USD, the outlook for GBP/USD is set to be dominated by political uncertainty. 

Key Quotes

“Yesterday morning’s announcement of a snap UK election has created significant volatility already.  Opinion polls suggest that May can win an election now given the weakness of the opposition and given that the country still hasn't felt much of a downside effect as a consequence of Brexit.  Both of these factors, however, could change over the next few years.  This means that from a tactical perspective an early election could be a good move by May.”

“If polls continue to suggest that May will be handed a strong mandate this is likely to lessen scope for uncertainty and volatility for the pound.  That said, Brexit uncertainty will continue to cloud the horizon for GBP.  In the context of G10 currencies we see both the USD and GBP as vulnerable and expect a choppy range centred around GBP/USD1.24 in the coming months.”