EUR/GBP: Upside risks on a 1 to 3 month view – Rabobank

According to analysts from Rabobank, the EUR/GBP pair remains unsettled despite the results of the general elections, as the risk of a disorderly Brexit remains. 

Key Quotes: 

“The Tory party’s 80 seat majority in the House of Commons means that the UK will be leaving the EU on January 31. PM Johnson is confident that a deal with the EU on the future relationship can be done by the end of the year. Various EU officials, including European Commission President Von der Leyen are not optimistic. The PM may be bluffing over his refusal to extend the transition phase beyond the end of the year, but as it stands this implies the risk of a disorderly Brexit remains.”

“Already the pound has given back a significant slice of its post-election gains. The fact that UK GDP growth is running below trend and that CPI inflation is under the BoE’s 2% target suggests an easing bias to monetary policy. Already this year’s comments from various MPC members including Governor Carney have suggested that the Bank may be biased towards cutting rates sooner rather than later. Since the Bank no longer has monthly policy meetings, the publication of its next Inflation Report is scheduled to coincide with its January 30 MPC meeting.”

“The recent spate of soft economic data combined with the fact that this will be Carney’s last meeting as governor suggests this meeting will be watched closely by the market. We see risk of EUR/GBP trading moderately higher on a 1 to 3 month view with GBP only recovering later in the year if the future relationship talks between the UK and the EU progress well.

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. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD pressured under 1.11 amid virus fears, ahead of the ECB

EUR/USD is trading below 1.11, under pressure as fears of the coronavirus weigh on markets. The ECB is set to leave rates unchanged and provide views about the current economic environment. 


GBP/USD consolidates gains above 1.31 after parliament seals Brexit

GBP/USD is trading above 1.31, consolidating its gains. The House of Lords gave its final seal to Brexit. Speculation ahead of the BOE's decision continues after upbeat data diminished chances for an imminent move.


Forex Today: Coronavirus fears spread and weigh on markets, Aussie surges, all eyes on the ECB

Chinese authorities have shut down access links to Wuhan, the large provincial capital where the coronavirus originates from. The news, coming ahead of the Chinese Lunar New Year, is weighing on markets. 

Read more

WTI hits 7-week low, potential bull RSI divergence on 1H

WTI oil fell to $55.68 soon before press time, the lowest level since Dec. 3, having declined by 3.73% on Wednesday. The black gold has found acceptance below $56.60, which is the 61.8% Fibonacci retracement (one of the golden ratio) of the rally from $51.03 to $65.62.

Oil News

USD/JPY drops to fresh eight-day lows near 109.50

USD/JPY extends losses and trades close to an eight-day low near 109.50 in a relatively risk-off environment, with the media headlines full of the coronavirus as it spreads internationally. Bears can look to the golden ratio around mid-108s.