GBP/USD Fundamental Analysis – week of July 11, 2016 -Forecast

The GBP/USD closed the week near a 31-year low of 1.2952 down 10% for the month so far and off by 2.34% this week as Brexit stress and promises from the Bank of England of massive aid to combat economic problems weighed heavily on the currency. The pound has plunged 14% against the U.S. dollar since the U.K. voted to leave the European Union on June 23. It’s down about 12% since the start of the year, and is trading at its lowest level since 1985.

Analysts expect it will drop further from current levels around $1.29. Societe Generale has a medium term target of $1.23. George Soros said before the Brexit vote that the pound could slump as low as $1.15.

The Bank of England took steps to ensure British banks can keep lending and insurers do not dump corporate bonds in the “challenging” period that is likely to follow the country’s shock vote to leave the European Union.

The central bank said it would lower the amount of capital banks are required to hold in reserve, freeing up an extra 150 billion pounds for lending in a reversal of a decision it took earlier this year, when it started tightening screws on lenders because Britain’s economy appeared on course for more growth.

BoE Governor Mark Carney said the move represented a “major change” that would help the economy to weather the Brexit hit.

“It means that three quarters of UK banks, accounting for 90 percent of the stock of UK lending, will immediately have greater flexibility to supply credit to UK households and firms,” he told reporters.

Sterling dropped more than 10 percent against the dollar and banks’ share prices fell by a fifth after Britons voted on June 23 to leave the EU, prompting Prime Minister David Cameron to say he would step down

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