GBP: Tricky 1H 2020 ahead, but gains in the latter part still likely – ING

Petr Krpata, Chief EMEA FX and IR Strategist, suggests that EUR/GBP is unlikely to test the 0.8300 level again in the coming months.

Key Quotes

“Our economists still see the extension of the transition period, in one form or another, as the most likely scenario (as eleven months is a too short a period to complete complex trade negotiations), but the uncertainty about it should curb GBP gains during 1H 2020. This means that it is likely that any more pronounced GBP gains are to be back loaded into the latter part of 2020.”

“This is in line with our forecast where we expect GBP/USD to drop to 1.31 by 2Q20 but to rise towards 1.38 by 4Q20 on the back of optimism caused by the eventual extension of the transition period or, alternatively, a bare-bones trade agreement with a subsequent implementation phase baked in.”