Search ForexCrunch

Analysts at Danske Bank expect a 25bp rate cut by the Bank of Englan in May and more GBP weakness amid elevated Brexit uncertainty.

Key Quotes:

“UK formally left the EU on Friday, marking the beginning of the transition period running until 31 December 2020. Both the UK and the EU have published their trade agreement objectives. The most important red lines for the UK are to end regulatory alignment and the jurisdiction of the EU court. For the EU, it is to protect the integrity of the single market and the customs union, securing rights to fish in British waters and ensure the UK does not undercut EU standards (i.e. level playing field conditions).”

“These are initial positions and eventually both sides are likely to compromise. However, this is unlikely to happen until we are much closer to the deadline on 31 December 2020, as PM Boris Johnson has ruled out an extension.”

“We think more GBP weakness is in the cards this year, as we expect investors will become increasingly impatient with the lack of progress. We also expect a 25bp cut by the Bank of England in May, as elevated Brexit uncertainty continues to weigh on business investments.”