HSBC - "GBP has fallen quite sharply since the beginning of the year, but would seem to have further to go. The currency faces a toxic cocktail of declining fiscal credibility and monetary policy inaction just when market attention is shifting away from the Eurozone crisis and the US fiscal cliff. The fall in GBP so far, although swift, has been relatively modest in historic terms and it remains, if anything, above ‘fair value’ levels. The external accounts are weak and the market is not already short. Renewed currency weakness would probably be welcomed by the UK authorities. All this suggest that GBP could fall significantly further. At some point another aggressive leg down in GBP is possible which could return it to the 2008 trade-weighted lows. However, we confine our downward revision to a more modest magnitude, targeting 1.48 on GBPUSD by year end and 0.91 on EURGBP."