EUR / GBP recovers to 0.8930 after bouncing from weekly lows of 0.8915

• EUR / GBP falls further to hit one-week lows near 0.8900.
• The pound is appreciated in a more positive Brexit tone.
• Even if a deal is reached, the British pound will not rise much higher – Rabobank

The euro accelerated its downtrend against the pound during European trading hours on Wednesday, to hit a fresh one-week low at 0.8915, where the pair appears to have found support to return to the 0.8930 area.

Optimism about a Brexit deal underpinning the GBP

The common currency fell for the second day in a row against a much stronger pound amid hopes for an imminent trade deal with the EU. The departure of top UK government adviser Dominique Cummings, who was a key Brexit supporter and a more positive tone from negotiators, has fueled hopes that there is still time to avoid a disorderly exit from the EU.

On the macro front, UK consumer inflation rose to 0.7% year-on-year in October, beating expectations for a 0.6% increase, which could have helped drive the British pound higher.

EUR / GBP: Seen at 0.89 in three months, 0.88 in six months – Rabobank

From a broader perspective, Rabobank’s currency analysis team rules out any sharp rally in the British pound over the medium term, even if a Brexit deal is eventually reached: “Disorder within the Conservative party suggests that Johnson may not hold his position while in the current legislature. This means that even when Brexit is in the rear view mirror, UK politics are likely to remain complicated. We forecast the EUR / GBP at 0.89 in a 3-month view and 0.88 in a 6-month view. However, the emerging political outlook in the UK suggests that these predictions may prove optimistic for the pound. ”