Analysts at Rabobank, hold the view that while EUR/GBP may slip further on a one month view, but politicians may still pave the way for a moderate recovery in six months. They warn the cross will likely rise to 0.92.
“The pound is shaping up to have its worst month since October 2016. When measured against the USD, GBP has plunged around 4.8% since the start of September. Since this move has been accentuated by a broad-based bounce in the value of the greenback, the pound losses are a slightly less shocking 2.4% vs. the EUR. There has been a lot of talk in the market in recent weeks about whether or not sterling has now hit “peak bearishness”. Given the huge degree of political uncertainly faced by the UK in the coming months we would consider it foolhardy to rule out the prospect of further sharp losses for the pound.”
“Our central view is that Brexit uncertainty is likely to push EUR/GBP to 0.92 in the coming weeks after which we expect a half-hearted improvement in GBP’s tone resulting in a move to 0.89 on a 6 month view. It is possible, however, to envisage a scenario of a no-trade-deal Brexit and another worsening in the UK economic backdrop which in turn could lead to both increased discord within the Johnson government and a negative Bank rate. These factors could result in a significant lurch lower in the value of the pound.”
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