GBP: performance to be affected by UK election and polls – Rabobank


The Pound rallied significantly in October on the view that the prospect of a no deal Brexit is now small but there are, however, some scenarios in which the United Kingdom could still crash out of the European Union, explained Rabobank analysts. They see 

Key Quotes: 

“According to some forecasters, the progressive increase in the popularity of the Tory party since the middle of the year suggests that there is the possibility that Johnson may be able to preside over a majority in parliament after the election. The market is assuming that this will lead the government to pass Johnson’s withdrawal bill into law and move onto the next phase of negotiations with the EU. GBP/USD could initially spike higher to the 1.32 area or even beyond on this election outcome with EUR/GBP potentially dropping below 0.84. However, the gains may not last. If the ensuing trade negotiations with the EU do not go well, the risk of a no deal Brexit at the end of the transition phase could again re-appear.”

“If the probability of a no deal Brexit was seen to rise again at any point between now and the end of the transition phase in December 2020, we expect that GBP/USD could plummet to the 1.15-1.10 area and that EUR/GBP could start to approach parity.”

“Another risk for GBP comes from the opinion polls themselves. While GBP can be expected to be influenced by the predictions of the pollsters in the weeks leading to the December 12 election, there is the clear risk that the signals will be misleading.”

“Our central view is that GBP/USD will be trading close to current levels on a 3 to 6 month view with EUR/GBP trading around 0.84. This assumes that Johnson’s withdrawal bill will be passed through parliament and that a trade deal with the EU still appears as a reasonable prospect. This scenario would also imply a calming of political mayhem in the UK and signs of more coherence amongst MPs.”

“While we see risk of an initial spike if Johnson is successful in selling his Brexit bill to a new parliament, the slowdown in global growth still suggests that the pound is still likely to be exposed to economic headwinds and speculation about potential BoE rate cuts. These uncertainties coupled with the realities of trade talks are likely to take the froth out of any initial relief rally.”

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


Latest Forex News

Editors’ Picks

EUR/USD falls amid Sino-American tensions ahead of Non-Farm Payrolls

EUR/USD is trading around 1.1850, down amid a risk-off mood stemming from President Trump's move against China's TikTok and WeChat. Tension is mounting ahead of the highly uncertain Non-Farm Payrolls.

EUR/USD News

Gold consolidates near record highs, flat-lined around $2060 area ahead of NFP

Concerns about escalating US-China tensions pushed gold to fresh record highs on Friday. A goodish pickup in the USD prompted some profit-taking amid overbought conditions. 

Gold News

GBP/USD retreats amid doubts about the furlough scheme, dollar strength

GBP/USD is struggling around 1.31 as UK Chancellor Rishi Sunak said the furlough scheme that is underpinning the economy cannot last forever. The dollar is gaining ground amid geopolitical tensions ahead of the Non-Farm Payrolls.

GBP/USD News

Forex Today: Dollar ticks up after Trump's TikTok move, all eyes on Non-Farm Payrolls

Trump's executive order against TikTok and WeChat has dampened the market mood and strengthened the dollar. Fiscal stimulus have made limited progress and investors are now focused on July NFP, which carries high uncertainty amid the resurgence of coronavirus. 

Read more

WTI drops 1% to $41.50 ahead of US NFP, rigs data

WTI (futures on Nymex) is on a steady decline so far this Friday, undermined by reduced demand for higher-yielding assets amid the renewed US-China tensions induced risk-aversion.

Oil News

Forex MAJORS

Cryptocurrencies

Signatures