For the British pound, attention has turned to Brexit, despite the multitude of fiscal news headlines, with the news that talks will continue between the UK and the EU pushing EUR / GBP to its lowest levels. from October 14. Rabobank economists do not see the cross moving below 0.88 in the coming months as the market is unprepared for post-Brexit trade deals.
Key statements:
“While a trade deal between the EU and the UK would likely trigger a relief rally in the pound, we expect the move to be lukewarm. The risk that a deal lacks the breadth that had once been expected, combined with the vulnerable nature of the UK economy and the prime minister’s weak popularity levels, suggest that the British pound will still face several hurdles next year. “.
“We see potential for EUR / GBP to climb again to 0.89 if a Brexit deal is announced in the coming weeks between the UK and the EU. That said, given that the deals reached will likely be limited and with the possibility of border disruptions in January, we do not expect the relief at the end of the Brexit process to be enough to divert attention from a set of poor fundamentals in the UK. ”
“We see little prospect of the EUR / GBP being able to push well below the 0.89 / 0.88 area in the coming months.“.
Credits: Forex Street
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