GBP: Guided by Brexit uncertainty - Westpac

Analysts at Westpac suggest that developments over the past two months in the Brexit ‘debate’ have led them to revise up their forecast profile from a low of USD1.24 to USD1.28 in March 2019, currently 1.2865.

Key Quotes

“While the previously forecast low was nearly attained in December – USD1.2487 seen on December 11 – authorities’ willingness to potentially extend the Article 50 consultation period past end–March 2019 has seen the market become more positive on an eventual compromise, even though no real progress has been made in negotiations.”

“Against this core view however are the risks, both of a ‘no deal’ Brexit – a very low but not zero probability – and more importantly of a further deterioration in UK growth. It is because of these uncertainties that we do not see USD1.35 being regained on a sustained basis until the second half of 2020, even though the US dollar is expected to turn in the December quarter of 2019.”