Where is GBP/USD going? It hasn’t been able to rally beyond the moves driven by the dollar’s weakness, but hasn’t fallen either. What’s next?

Here is ING’s view, courtesy of eFXnews:

ING FX Strategy Research discusses the GBP outlook, and thinks that sterling is likely to reach 1.40 in Q1 of 2018 as as UK economic pessimism fades.

“We see two factors dictating the pound’s narrative in the short-term: (1) Domestic UK politics and (2) The Bank of England’s policy path.

On the former, we believe noise around a fragile Conservative government may act as a limiting factor for the currency – but note that the bar to actively sell the pound on UK politics remains high…

In terms of UK politics, only a 2018 General Election may feasibly see such risks being priced into GBP…,” ING argues.

“Our conviction call is for GBP/USD to rally up to 1.40 on this story, with EUR/GBP moving to 0.85-0.86,” ING projects.