GBP strength has been gathering momentum allowing the pound to top the G10 performance table in the year to date. Nonetheless, economists at Rabobank see hurdles for GBP heading into the spring though expect the EUR/GBP pair to settle in the 0.85 zone by year-end.
Key quotes
“Issues related to red tape at the UK’s borders and problems connected with the Northern Ireland protocol have ensured that Brexit continues to cast shadows. In particular, the Northern Ireland issue has the potential to complicate UK politics and weigh on the pound in the coming months.”
“Another hurdle for GBP could be the Scottish elections in May. If the SNP performs well, as expected, the possibility of another Independence Referendum will rise. Scottish press are reporting on the possibility of an ‘illegal’ vote potentially this year. This could raise further questions about the state of the union in the UK.”
“While the UK economy will be opening up this year, the PM’s plan is more cautious than many had expected and this could also hinder the pace of the economic bounce back. Johnson this week indicated that restrictions may not be fully lifted until June 21.”
“Bullish momentum in the pound has pushed EUR/GBP through our long held 0.87 medium-term target. The move may have further to run in the near-term. However, we see bumps in the road ahead and see scope for pullbacks in the spring before EUR/GBP settles in the 0.85 area later in the year.”
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