EUR/GBP: Brexit trade talks to undermine the pound - Rabobank

According to analysts from Rabobank, anxiety around the trade talks between the European Union and the United Kingdom is likely to weigh on GBP. They forecast EUR/GBP at 0.89 in 3m, 0.90 in 6m, 0.88 in 9M, 0.84 in 12m and at 0.78 in 24M. 

Key Quotes: 

“Since the BoE turned clearly hawkish in September 2017, GBP has drawn support from expectations of higher interest rates. News in December of an EU/UK agreement on the legacy issues connected with Brexit and the subsequent confirmation of a deal regarding the post Brexit transition period have also supported sterling.”

“While a May rate hike from the BoE is largely priced-in, the pound may find further support if the MPC lean towards another rate hike in November.”

“We expect anxiety regarding the EU/UK trade talks to undermine the pound on a 3 to 6 mth view. On a 12 mth view we expect GBP to rise on an anticipated free trade deal.”