- EUR / GBP continues to decline = hit a one-week low near 0.8900.
- The pound appreciates on a more positive Brexit tone.
- Even if a deal is struck, the pound will not climb much higher – Rabobank
The Euro accelerated its downtrend against the Pound during European trading hours on Wednesday, reaching a new one-week low at 0.8915 where the pair appears to have found support moving back to the 0.8930 area.
Optimism over Brexit deal underpinning GBP
The common currency fell for the second day in a row against a vastly stronger pound in hopes of an imminent trade deal with the EU. The departure of UK senior adviser Dominique Cummings, who was a key Brexit supporter, and the more positive tone of negotiators have heightened hope that there is still time to avoid a disorderly exit from the EU.
On the macroeconomic front, UK consumer inflation rose to 0.7% year-on-year in October, beating expectations of a 0.6% increase, which could have helped push up the delivered.
EUR / GBP: seen at 0.89 in three months, 0.88 in six months – Rabobank
From a broader perspective, the Rabobank FX analysis team rules out any brutal rally in GBP over the medium term, even if a Brexit deal is eventually struck: “The disarray within the Conservative Party suggests that Johnson may not not maintain his position for the duration. of the current electoral mandate. This means that even when Brexit is in the rearview mirror, UK policy is still likely to be messy. We expect EUR / GBP to be 0.89 in a 3-month view and 0.88 in 6 months. However, the emerging political outlook in the UK suggests that these forecasts could be bullish for the pound. “