GBP/USD could rise to 1.36 next year, once Brexit uncertainty clears - CIBC

Analysts at CIBC, see the GBP/USD pair reaching 1.36 during the first quarter of next year and 1.42 during the third quarter.
Key Quotes:
“The BoE have long argued that rising wage pressures would help drive the process of ongoing policy normalization, potentially beyond the long and gradual process of one hike a year. Hence absent the Brexit negotiations, the realization of wages growing at the fastest annual rate in ten years would in isolation point towards the currency garnering interest rate based support.”
“While the BoE contend with tight labour markets and rising wage pressures, policymakers and politicians cannot ignore the increasingly tight Brexit timetable and elevated degree of political instability.”
“Our base case scenario is that PM May should be able to see off any leadership challenge while any initial failure to get the withdrawal bill through parliament could end up rather reminiscent of the US TARP vote in 2008. In other words, an initial rejection is followed by asset market vulnerability which prompts a political reassessment of the downside risks.”
“Eventual passage of the withdrawal bill will therefore come only after sizeable Sterling volatility. A Brexit resolution which avoids the worst case scenario of a no deal exit will open the way for a rebound in sterling in 2019. The prospect of postponed business investment and consumer spending coming back on stream, in conjunction with the BoE looking to extend policy normalization once Brexit uncertainty clears, points towards Sterling rising to 1.36 by early next year.”
Author

Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

















