EUR/GBP: Uncertainty from UK politics will remain a constraint on the outlook for the pound – Rabobank

Even if there is a Brexit deal and all the drama is in the rearview mirror, United Kingdom politics are still likely to be messy, point out analysts at Rabobank. The forecast EUR/GBP at 0.89 in a three-month view. 

Key Quotes: 

“EUR/GBP has been trending lower since its recent peak on September 11. A break below the 200 day sma last week has failed to hold and is now likely to become key support. The 200 day sma currently sits around 0.8937. Despite the hit to UK economic recovery hopes by this month’s increase in coronavirus related restrictions in England, politics continues to cloud the horizon for GBP. Looking ahead there is a very strong chance that uncertainty coming out of Westminster will remain a constraint on the outlook for the pound for many months to come.”

“The disarray within the Tory party suggests that Johnson may not hold on to his position for the duration of the current electoral term. This means that even when Brexit is in the rear view mirror, UK politics are still likely to be messy. We are forecasting EUR/GBP at 0.89 in a 3 month view and 0.88 in 6 months. However, the political outlook that is emerging in the UK suggests that these predictions may prove optimistic for the pound.”