EUR/GBP: Still holding below the 0.90 level - Rabobank

Jane Foley, senior FX strategist at Rabobank, suggests that EUR/GBP is still holding below the 0.90 level as the pound had a good day on Friday ahead of the return of parliament from recess today.

Key Quotes

“This morning investors are looking a little less confident though.  Parliament’s meaningful vote on PM May’s EU Withdrawal bill will reportedly take place on January 15 but this week there promises to be plenty of news to keep the Brexit rollercoaster moving.”

“For GBP any sign that a deal would be accepted and that the risk of a no-deal has faded can be expected to be met with relief. The parliamentary debate of the Withdrawal bill, which is due to restart on Wednesday, will thus be a strong focus for the pound.”

“Despite all the political uncertainty surrounding Brexit, the outlook for GBP near-term boils down to whether the UK faces a hard Brexit in March or not. While there is a strong risk that EUR/GBP could push above the 0.90 level again in the coming days, our central view remains that a hard Brexit will be avoided and that GBP will recover some ground on a 3 month view.  That said, scope for sustained gains, could be limited by the degree of uncertainty and political effort required to negotiate a trade deal over the next couple of years.  Our 3 mth EUR/GBP forecast stands at 0.87.  That said, on a hard Brexit we would expect to see a sharp surge in the value of EUR/GBP towards parity.”