Analysts at CIBC see that the pound has remained resilient despite all the Brexit drama. They forecast GBP/USD at 1.34 in Q2 2019 and 1.38 for Q4.
Key Quotes:
“Despite ongoing Brexit uncertainty, Sterling has proved the best G10 performer year to date versus the USD. In terms of macro data, we see ongoing labour market resilience, with unemployment hovering below 4% for the first time since 1975, and average earnings at levels not seen since 2008. This provides a counterpoint to the four quarters of negative business investment.”
“While political risks remain extreme, better than expected data during Q1, including composite PMI reaching a four month-high in February, suggests that the rebound in January GDP could underpin GBP, Brexit risks excepted.”
“The European Council has, by opting for a flexible extension process, attempted to put the onus on the UK to determine the outcome of the negotiations; the EU is keen to both avoid a hard exit or be the blame for facilitating it. While concerns over the risks of a hard exit have recently been fanned, should the market become increasingly confident of Parliament resuming control - in the process encouraging a relatively soft exit - expect this to encourage medium-term GBP impetus.”
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