For the sterling the focus has been on 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 since October 14. Economists at Rabobank do not see the pair moving below 0.88 in the next months as the market is unprepared for post Brexit trading arrangements.
Key quotes
“While a trade deal between the EU and the UK would likely trigger a relief rally in the pound we expect a move to be half-hearted. The risk that a deal would lack the comprehensiveness that had once been hoped for, combined with the vulnerable nature of the UK economy and the weak popularity levels of the PM suggest that GBP will still face several hurdles next year.”
“We see potential for EUR/GBP to climb back to 0.89 is a Brexit deal is announced in the coming weeks between the UK and the EU. That said, with the agreements made likely to be limited and with the possibility of border disruptions in January high, we don’t expect that relief at the end of the Brexit process will be sufficient to divert attention away from a poor set of UK fundamentals.”
“We see little prospect of EUR/GBP being able to push much below the 0.89/0.88 area in the coming months.”
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