Currency Risk Brexit outcome will determine EUR/GBP

What scenario is the most likely?

It looks increasingly likely that Brexit will be postponed. There is still the problem that none of the potential scenarios enjoys the support of a majority. This means that businesses will continue to be faced with a great deal of uncertainty. However, this uncertainty would not last as long in the event of a new referendum or new elections. Nevertheless, the worst alternative for the markets would be new elections, with Labour securing victory. However, this is not a very likely scenario.

In the current circumstances, many British businesses are reluctant in terms of investment and the recruitment of new staff. Indeed, Brexit has dramatic consequences for many businesses. However, as long as it is unclear what type of Brexit will occur, it will not be clear what the consequences are.

Short term

We believe EUR/GBP could temporarily slide down to approximately 0.87 in the event of an extension, but we believe the pair will subsequently still climb to 0.91-0.93, assuming the developments surrounding Brexit will continue to be very unclear in the event of an extension. In this case, GBP/USD could rise to slightly above 1.30, after which the pair will embark on a decline to approximately 1.20.

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In our most recent EUR/GBP publication we focus in more detail on the various scenarios and we offer specific medium-term expectations for EUR/GBP. Leave your email address here and you will receive (without any obligation and free of charge) the most recent EUR/GBP publication.

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