EUR/GBP to spike towards 0.93 on a no-trade-deal Brexit – Rabobank
|Economists at Rabobank expect to see a spike to the 0.93 region on the EUR/GBP pair on the event that no trade deal is signed by the EU and the UK.
Key quotes
“On the assumption that the UK and EU will find enough common ground to sign off on a trade deal this year we see scope for a half-heated GBP recovery to EUR/GBP 0.89 on a three-month view.”
“Given the risk that any deal will lack the comprehensiveness that many had hoped for when Johnson was elected last December and in view of the economic struggles that are implied by the COVID-19 crisis, we foresee various headwinds for the pound in the medium-term.”
“The economic impact of fresh COVID-19 related restrictions is likely to be a constraint on the pound. In the three months to August redundancies increased by a record 114K. A spike in the levels of jobless is expected when the UK’s furlough scheme ends this month. This week BoE Governor Bailey spoke of scarring to the economy with the second wave of the pandemic set to increase the long-term damage. This outlook suggests that the market will continue to perceive risk of a negative Bank rate, though this is not our central view. In view of these headwinds, we expect EUR/GBP to struggle to break below 0.89 in the early months of next year.”
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