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The pound is the best performing G10 currency on a one day view on the back of both Brexit related optimism and on hope that the UK economy can benefit significantly from vaccination against COVID-19. Nonetheless, economists at Rabobank expect the EUR/GBP pair to stabilize around the 0.88-0.89 area in the coming months.

Key quotes

“EUR/GBP is currently not trading far above the November low around 0.8861. This area provided decent support both in June and in September, indicating that a break lower could pave the way for a move towards the 0.87 area.”

“GBP still has a lot of hurdles to clear before investor confidence can increase another couple of notches and UK politics has the potential to sour the mood. We are expecting that EUR/GBP will trade mostly in the 0.88/0.89 region in the coming months.  “

“There is scope for a relief rally in GBP on news that a deal has been signed, though the failure of the UK and EU to agree a comprehensive deal will likely limit upside potential.”

“Despite the government’s huge fiscal effort, the depth of the downturns suggests that the UK economy will suffer significantly from scarring in the next few years. Although the market has currently adopted a more positive outlook for the pound, it is not out of the woods yet.”  

 

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