According to Jane Foley, Senior FX Strategist at Rabobank, the pound remains vulnerable as time runs out for a Brexit deal.
Key Quotes:
“There is plenty of uncertainty about how May will draw a consensus out of her cabinet. Given that time is running out to do a deal with the EU before the start of Brexit in March 2019, GBP is clearly vulnerable.”
“For some time it has been our view that by March 2019, a veil of uncertainty about the UK’s trading relationship with the EU would be lifted and that this would encourage investment in the UK and provide a boost to the pound. Last week, however, we revised lower our GBP forecasts given the heightened risk that political uncertainty could prevail well beyond next March.”
“Fear that time is running out for a trade deal before Brexit starts next March and concerns in the market that the UK could still crash out of the system have been undermining GBP in recent sessions.”
“Last week the pound was supported by the news that BoE Chief Economist Haldane voted along with established hawks McCafferty and Saunders for an immediate rate rise. McCafferty, however, is scheduled to leave the MPC at the end of August. Yesterday comments from his replacement Haskel suggest a more dovish leaning and this has sapped some support from the pound.”
“We have a year-end target of GBP/USD1.28.”
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