EUR/GBP Eyes 0.73 in 3-Month – Rabobank
The European cross could retreat to the 0.7300 area in the next 3-months, suggested Senior FX Strategist at Rabobank Jane Foley.
Key Quotes
“GBP has made an impressive recovery vs. the EUR since early April, with the most recent gains finding incentive from the results of the UK opinion polls regarding the June 23 EU referendum”.
“The recent gains in the pound clearly limit the scope of a relief rally on a ‘Remain’ vote. That said, a clear victory for the Remain vote is still likely to trigger a strong bout of GBP buying though the extent of the upside potential is likely to be limited as focus quickly returns to UK economic variables”.
“While there is some evidence to suggest that Brexit uncertainty has had some economic impact, the UK has also been experiencing many other headwinds”.
“While a Remain vote may unleash a backlog of projects in certain sectors such as commercial property, underlying weakness in areas such as manufacturing and construction are likely to still be apparent”.
“This suggests that the Bank of England is likely to retain a steady hand on policy for some time. Assuming there is a Remain vote, we are forecasting that the BoE will hold policy steady at least until May 2017”.
“The slackening in growth suggests that even on a Remain vote next month, it is unlikely that EUR/GBP will find the incentive to return to its November lows. Assuming a Remain vote we expect EUR/GBP to trade at 0.75 on a 1 month view and 0.73 in 3 months”.
