The pound advanced on hopes for a Brexit breakthrough. Here are two opinions that represent the targets that this optimism entails for the pound. We still have our doubts. The EU is very tough on the UK and the Irish issue also looms large.
Here is their view, courtesy of eFXnews:
GBP/USD: Breakthrough In Brexit Deadlock Reinforces 1.36 Target By Year-End – ING
ING FX Strategy Research discusses GBP outlook in light of the recent media reports which have suggested that the EU and the British officials have agreed to the settlement of the so-called ‘divorce bill’.
“While this stage of the negotiations has little economic significance for sterling, the news of a breakthrough in talks has profound political significance for a currency that is pricing in a lot of bad news.
We do foresee a ‘gentlemen’s agreement’ over a transition deal as being a bigger positive catalyst for GBP down the road, but for now, we hold the view that small steps forward are helpful for UK asset prices.
We now have greater conviction over our year-end target of 1.36 for GBP/USD,” ING argues.
GBP/USD: Brexit Breakthrough Supports Our 1.36-1.37 Year-End Target – BTMU
“News that the EU and the UK have reached an outline deal on the financial settlement is very significant and despite recent increased concerns over the Irish border issue, this is the most important development pointing to a likely deal…
The pound would no doubt be stronger today were it not for that lingering uncertainty over the Irish border but assuming this does not thwart progress our year-end GBP/USD target of 1.3600-1.3700 is clearly achievable.
Furthermore, levels over 1.4000 next year are also achievable based on actual economic growth being stronger than the building consensus of economic weakness in the coming years,” BTMI argues.
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