Risk of EUR/GBP edging toward parity if chances of no-deal continue to grow - Rabobank
"It has been our central view that a no-deal Brexit this year will be avoided. The odds of this appear to be diminishing, though they have not yet disappeared, note Rabobank analysts.
Key quotes
"Despite his actions in limiting the ability of the parliament to push back against a no deal Brexit, Johnson continued to stress that he does not want to leave the EU without a deal. The implication is that he is playing hard ball in order to force the EU to renegotiate the withdrawal agreement reached with PM May to remove the N. Ireland backstop."
"To date, the EU are standing firm. Last week, Chancellor Merkel indicated that it was up to Johnson to come up with alternatives to the backstop in the next 30 days. This week it has been reported that EC President Juncker was willing to “work constructively” with Johnson and look at any concrete proposals he may have."
"These sentiments were repeated by Dutch PM Rutte. Insofar as it has proved impossible to find an alternative to the backstop over the past two years, it is likely becoming increasingly difficult for investors to believe that an alternative to the N. Ireland backstop can be found. It is also been reported that Johnson is being told by Brexiteers that they wouldn’t be happy with the deal even if the backstop was removed. If the chances of a no deal Brexit continue to grow over the coming weeks we see risk of EUR/GBP edging towards parity. Our central forecast of EUR/GBP 0.90 on a 3 month view assumes that Brexit will be delayed beyond Halloween."
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
