EUR/GBP to rise to parity on no-deal Brexit – Rabobank

Analysts from Rabobank, have a three month target for the EUR/GBP pair at 0.90, but they warn that in the case of a no-deal Brexit it could rise to 1.00. 

Key Quotes: 

“Stronger than expected UK CPI inflation data this morning has a modest impact on the short end of the curve. The move, however, has not been sufficient to distract attention from the pressure that has been exhibited on the longer end of the curve. This morning the inversion of the 2 to 10 year section of the curve has triggered the headlines that this is the first such move since the financial crisis. Since curve inversion is usually seen as a precursor to recession, it is no wonder that the money market continues to point to a BoE rate cut next year. That said, the UK government is flirting with the option of a no deal Brexit on October 31 this year. This would doubtless bring a further drop in the  value of the pound and a ratcheting up of headline inflation in the UK. The BoE thus has a difficult path to tread in the next couple of years.”

“Or house view remains that Brexit is likely to be delayed beyond October. This is likely to bring a sigh of relief from investors and a modest reprieve for the pound. However, insofar as kicking the can down the road is not a solution, any GBP bounce is likely to be half-hearted. Our 3 month forecast is EUR/GBP 0.90. On a no deal Brexit we see EUR/GBP rising to parity. We do expect some recovery in the following months but the pace and extent of this will depend on how the country copes during the winter months.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: Ends five-day losing streak, but bias remains bearish

EUR/USD gained 0.19% on Wednesday, snapping a five-day losing streak, however, the outlook remains bearish as the pair is trading well below the former support-turned-resistance of 1.1162 (Aug. 12 low).


GBP/USD: Teasing inverse head-and-shoulders breakout

GBP/USD is flirting with the inverse head-and-shoulders neckline resistance of 1.2165 at press time. An inverse head-and-shoulders is a bullish reversal pattern and its success rate is high when it appears after a notable sell-off.


USD/JPY: 106.50 tested amid higher S&P futures, Treasury yields

Following a temporary reversal seen on Tuesday, the USD/JPY pair resume the bullish momentum in Wednesday's Asian trading and tests the 106.50 level, tracking the gains in the US Treasury yields and S&P 500 futures. 


Gold: Bulls cheer pullback from 10-day EMA

Following its successful bounce off 10-day exponential moving average (EMA), Gold takes the bids to $1507 during the early Asian session on Wednesday. The yellow metal now heads to Friday’s high around $1528 ahead of questioning the monthly top surrounding $1535.

Gold News

FOMC Minutes July 30-31 Meeting Preview: The Fed vs the markets

The Fed policy that switched to neutral in Jan completed the circle last month with first decrease in the base rate in more than a decade from a 2.50% upper target to 2.25%. Markets expect a second cut at the September 18th FOMC.

Read more