Loading...

Benign Brexit Outcome Most Likely; Pound to Strengthen, Says Bank of America

Developments this week make a “benign Brexit outcome” the most probable and offer reason enough to be favouring British pound appreciation for the foreseeable future, analysts at Bank of America Merrill Lynch have said.

#News #AUD #EUR #GBP #USD
Email share     Facebook     LinkedIn    Twitter
British Pound Currency News and Forecast

Brexit continues to dominate among influencers of pound exchange rates.

With Parliament taking control of affairs via a late Commons vote on Monday and now committed to a round of “indicative votes,” all roads point to a softer Brexit, analysts say, and this favours higher sterling exchange rates.

Britain’s currency is back trading at US$1.32 this week, and against the euro, at €1.17. It had been as weak as US$1.30 and €1.146 last Thursday when it wasn’t clear whether the UK would be granted any extension at all beyond March-29, no matter how short.

In a note on Tuesday morning, MUFG wrote that the two most likely outcomes from here are “no clear majority for a single outcome [following indicative votes], which would extend the current deadlock, or that a majority of MPs back a softer Brexit.”

Despite remaining the legal default, a no-deal Brexit is close to being off the table—“Mr Brexit” himself, Nigel Farage, admitted as much on LBC radio on Tuesday morning—and this, Bank of America Merrill Lynch says, means currency speculators should be betting on pound appreciation.

“Cost-benefit analysis of the key players suggests that a benign [Brexit] outcome remains likely. We recommend investors look to add to long GBP positions on dips,” BofAML said.

In agreement are technical analysts at Commerzbank. In a Tuesday note discussing EUR/GBP, the German bank’s chief technical analyst Karen Jones said there “is a risk of a slide to the 200-week Moving Average at £0.84,” thereby implying GBP/EUR rates in the €1.19s—levels not seen since May 2017.

 

Further Reading

 

Coronavirus panic drives US dollar strength

Currency rates were extremely volatile last week as the coronavirus situation worsened day by day with various countries implementing ever-tougher measures to stop the spread of the disease.

Last update: 23 Mar, 2020

Coronavirus spread fears linger – USD strong – AUD at 11 year lows

This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.

Last update: 22 Feb, 2020

Coronavirus unnerves currency markets

The strong start to the year for “risk-on” currencies is already a distant memory.

Posted: 3 Feb, 2020

  

Posted to: News

 
 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 

Get a Better FX Deal when you Send and Spend Abroad.

 

Do NOT follow this link or you will be banned from the site!