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EUR/GBP: Potential for a transfer in direction of EUR/GBP1.00 on laborious Brexit – Rabobank

“Volatility in EUR/GBP could also be properly beneath its peak of late final yr however the identical can’t be mentioned of UK political developments,” notes Rabobank analysis crew. “This week has seen MPs from each the Labour and Tory events break free.  The widespread floor of the 11 MPs that may sit collectively in parliament because the Unbiased Group is that they favour remaining within the EU.”

Key quotes

 Though UK diplomats have spun an optimistic line above the constructiveness of talks between UK and EU officers this week, there doesn’t seems to have been any concrete motion. If PM Could can’t deliver one thing new to parliament subsequent week she has promised to make an announcement on February 26.”

“Lawmaker are because of debate the federal government’s assertion and probably vote on amendments which may defy PM Could’s place.   The Cooper modification would suggest that if a deal has not been agreed by mid-March, the PM must deliver a movement to parliament that will enable both a no-deal Brexit or an extension past March 29.  Parliament would virtually definitely vote for the latter.  Whether or not or not the Copper modification succeeds subsequent week can be largely right down to the variety of Tory MPs that select to insurgent.”

“If the Cooper modification passes subsequent week, the market will assume a tough Brexit is off the desk and GBP is about to rally. That mentioned, the scale of any rally is more likely to be restricted by the truth that the market consensus is already properly positioned for a gentle Brexit and by concern that the UK economic system is already slowing.”

“If by the tip of subsequent week the UK stays on track for a tough Brexit we might anticipate concern to have began to eat away at GBP’s resolve.  Whereas our central projection is for EUR/GBP to be positioned within the 0.86-85 space on a three to six month view, on a tough Brexit will see the potential for a transfer in direction of EUR/GBP1.00.”

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