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Analysts at Westpac suggest that developments over the past two months in the Brexit ‘debate’ have led them to revise up their forecast profile from a low of USD1.24 to USD1.28 in March 2019, currently 1.2865.

Key Quotes

“While the previously forecast low was nearly attained in December – USD1.2487 seen on December 11 – authorities’ willingness to potentially extend the Article 50 consultation period past end-March 2019 has seen the market become more positive on an eventual compromise, even though no real progress has been made in negotiations.”

“Against this core view however are the risks, both of a ‘no deal’ Brexit – a very low but not zero probability – and more importantly of a further deterioration in UK growth. It is because of these uncertainties that we do not see USD1.35 being regained on a sustained basis until the second half of 2020, even though the US dollar is expected to turn in the December quarter of 2019.”