Despite weaker economic fundamentals, analysts at CIBC expect the British pound to appreciate into year-end on the back of domestic politics, and further next year, following anticipated progress in Brexit negotiations.
Key Quotes:
“Looking into year-end, the UK is facing an election (December 12th) against a backdrop of increasingly downbeat fundamentals. While the economy narrowly avoided a recession in Q3, it still expanded by 0.3% q/q, with the annual rate retreating to its lowest in almost a decade, at 1.0% y/y.”
“Recent job data showed vacancies registering the largest annual decline since 2009, while the country’s total labour force declined by 58K in Q3 – the worst print in four years."
“While waning macro fundamentals are partially a function of slowing global growth, Brexit remains the primary constituent of domestic uncertainty and the weakening economic backdrop. The UK has now passed its third Brexit deadline, and the outcome of the upcoming election will determine whether the market can expect at least some form of resolution, as Parliament is supportive of the recently revised and negotiated withdrawal agreement.”
“Despite weakening economic fundamentals, our base case scenario is for the Conservatives to gain a majority in the upcoming election, though it could be by a tight margin. Furthermore, given that we expect progress to be made on the Brexit process next year, that should see Sterling rally towards highs reached in May. However, given the imminent election, expect Sterling bulls to remain contained in the near-term.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.