GBP: Cheap Around Current Levels Even With The Ongoing Uncertainty – SocGen

The Brexit deal has been shunted to the sidelines, due to the current COVID-19 crisis. Still, Brexit will have a significant impact on the British pound. What is the outlook for EUR/GBP?

Here is their view, courtesy of eFXdata:

Societe Generale research discusses GBP outlook and notes that Sterling looks cheap around current levels especially against the EUR.

“Brexit represents a negative productivity shock, but IF the EU and UK negotiate a sensible trade deal, the shock will not be that great and the UK’s GDP growth isn’t likely to be lower than the Eurozone’s over time. In the next two or three years, the UK has the potential, thanks to an aggressive fiscal reaction, to grow faster than the Eurozone,” SocGen notes.

“Bold fiscal action will soften the economic impact of the Covid-19 pandemic and should support sterling.  If  there were a sensible UK/EU trade deal in place, this Budget might have made us think EUR/GBP would head to 0.80 or below. Even with the ongoing uncertainty, sterling’s cheap at these levels,” SocGen adds.

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