EUR/GBP creeping up towards 0.87 during the course of 2022 – Rabobank

The EUR/GBP will likely move to the upside over the next months according to analysts from Rabobank. They see the current state of UK politics not helping the pound. 

Key Quotes: 

“Despite this month’s 15 bps BoE rate rise, the pound is still not trading very well.  After an initial push lower on the Bank’s policy announcement last week. EUR/GBP is again pressing up against the 200 day sma.  Omicron is certainly a factor behind the inability of the pound to find traction in the BoE’s more hawkish tone.”

“A primary reason for PM Johnson not announcing further Covid restrictions this week, despite the exponential growth in UK Covid cases, is likely related to fear of his own backbenchers.  Around 100 Tory MPs earlier this month rebelled against Johnson’s proposal to introduction Covid passports for large venues – a measure that was only passed with the support of the Labour opposition.   The resignation letter of Brexit Minister Frost at the weekend expressed his concerns over the ‘direction of travel’ of Johnson’s government with respect to rising taxes and the recent Plan B of new Covid restrictions.  

“Press reports suggesting that some in Westminster are openly talking about a potential leadership challenge.  While there is no imminent general election in the UK,  Johnson’s leadership is looking weak.  This does nothing to strengthen confidence in post Brexit Britain and, on the margin, will undermine the pound  We see EUR/GBP creeping up towards 0.87 during the course of next year.”