Rabobank senior FX strategist says GBP/USD is likely to remain under 1.30 level in the first half of 2020

Rabobank senior FX strategist says GBP/USD is likely to remain under 1.30 level in the first half of 2020
  • Rabobank FX strategist says GBP/USD is expected to remain under 1.30 level in the 2020's first half.
  • The analyst cites political and economic uncertainty for the downbeat forecast for Sterling.
  • EU Commission President says it is "basically impossible" for the two parties to close a deal by the end of the year.
  • UK's official data regarding CPI inflation, monthly GDP, construction and industrial production figures among the major market movers for next week.

Governor Carney of the Bank of England (BoE) delivered a speech earlier on Thursday. Following the Governor’s comments, Rabobank’s senior forex strategist, Jane Foley, remarked that the overall tone of Carney’s speech was dovish that is manifesting in the form of weighing on the GBP/USD currency pair. Cable dropped to around 1.3010 level on Thursday that marked its worst since the end of December.

Foley further added that Carney hinted in his speech that the recent economic projections of the BoE may have been overly optimistic. The governor also highlighted that the UK’s economic growth rate is currently below potential. While the monetary policy committee had been expecting it to catch steam before the end of the year, there is no way to be sure of the timing of the rebound owing to the ongoing complications regarding Brexit.

GBP/USD Is At A Risk Of Getting Hit By Political As Well As Economic Uncertainty

To add to the political uncertainty regarding Brexit, is the prospect of added monetary leniency by the Bank of England in the upcoming weeks directed at giving a little nudge to the UK’s economy. In light of the political and economic uncertainty, therefore, the senior analyst forecasts the GBP/USD pair to remain under 1.30 in the first half of 2020.

On the other hand, however, a forex survey by Bloomberg highlighted that cable has traded above 1.30 level since the UK’s general election on December 12th, except for a few of the day Christmas days. Bloomberg’s survey also anticipated the pair to remain above the crucial 1.30 support in the upcoming months.

Sterling’s skeptics, however, are wary of the possibility that the deadline of December 2020 may prove to be too short for the European Union and the United Kingdom to strike a broad trade deal after Brexit. A similar opinion was echoed on Wednesday by the president of the EU Commission, Von Der Leyen, who labeled it “basically impossible” for the two parties to close a deal within this time period.

PM Johnson Continues To Be Optimistic Of Closing A Deal With The EU Before December 2020

While PM Johnson continues to spread optimism that he will sign a deal with the EU before December 2020, in an event that he fails to deliver on his promise, the repercussions for GBP/USD in the forex market and the UK’s economy at large could be rather dire.

In the next week, the official UK data that covers the construction sector, industrial production, CPI inflation, and the monthly GDP, Cable can be expected to get a clearer direction in the forex market.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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