Analyst Predictions for British Pound vs. Euro and Dollar over Coming Hours and Days

Image © European Union , 2017   /  Source: EC - Audiovisual Service

- "If May survives the week, GBP may take a little comfort" - Rabobank

- May-Juncker meeting dominates immediate focus

- "We stay cautious on Sterling" - KBC Markets

We gauge the mood amongst currency strategists and analysts as to where they see the British Pound heading over coming hours and days.

On the immediate agenda, we have Prime Minister Theresa May's visit to Brussels where she is to meet European Commission President Jean-Claude Juncker to iron out further details concerning the Brexit deal ahead of this weekend's meeting of European leaders.

Headlines from this event could well cause some movement in Sterling.

Both sides already have a draft Withdrawal Agreement and the details of a political declaration on future U.K.‑E.U. relations is necessary.

This declaration will serve as a guide to in‑depth trade talks that commence after Britain leaves the E.U. in March 2019, in addition a final decision on the length of the transition period is necessary.

Could May work the political decleration in such a manner as to get some much-needed support from those members of her party who are worried the U.K. will ultimately be locked into Europe's clutches indefinitely by the Withdrawal Agreement's backstop?

Perhaps. If she does, then Sterling could move higher. What such a text would look like is up for intepretation and we will be guaging any reactions.

At the time of writing we note the Pound is content to tread water ahead of any headlines: The Pound-To-Euro exchange rate is quoted at 1.1229; sharply lower than the November highs towards 1.15 but not remarkable by the standards of the longer-term post-referendum range that has seen the currency pair swivel around 1.1250-1.13.

Analysts are betting that the GBP/EUR exchange rate will still end the year lower than current levels. Consensus estimates for GBP/EUR from over 50 of the world's leading investment banks can be downloaded from from Horizon Currency here.

The Pound-to-Dollar exchange rate is quoted at 1.2784; again the pair is more-or-less in the middle of a longer-term range. Analysts are betting that the exchange rate will still end the year higher than where it is presently located. Consensus estimates for GBP/USD from over 50 of the world's leading investment banks can be downloaded from from Horizon Currency here.

What Analysts are Saying on Sterling's Outlook for Coming Hours and Days

Piet Lammens at KBC Markets in Brussels:

"After last week’s tensions, the Brexit debate temporarily calmed down. This might be slightly GBP-positive in a daily perspective. We stay cautious on Sterling as long as uncertainty on final vote persists."

Philip Borkin, Senior Macro Strategist at ANZ in Sydney:

"There wasn’t much in the way of new news on Brexit, but developments sit on a knife edge and that uncertainty in itself could see GBP remain on the back foot.

Nema Ramkhelawan-Bhana at RMB in Johannesburg:

"The multi-month peak in GBP/EUR at 1.15 has dipped into a valley, with the pair floundering at 1.12 as Theresa May fends off a leadership challenge ahead of December’s parliamentary Brexit debate. Though determined to conclude an amicable deal, May is fighting a losing battle to have the proposal passed in its current format, creating angst among market participants with the 30-day historical volatility on GBP/EUR at its highest level in more than a year."

Viraj Patel with ING Bank N.V.:

"UK Parliamentary arithmetic says that while we may remain in Brexit limbo... the reality of a no deal Brexit (& therefore a sharp drop in the Pound) will be stopped by politicians. If one subscribes to this, then GBP/USD at 1.27-1.28 will continue to offer good buying value."

Ned Rumpletin with TD Securities in London:

"Our base case calls for her to survive a vote of no-confidence (just), which would leave her in a stronger position going forward. This suggests cable could be ripe for a squeeze - but volatility could dominate near-term."

Jane Foley with Rabobank in London:

"If May survives the week, GBP may take a little comfort.  That said, the currency remains vulnerable and there is a risk that outlook for the pound worsens before it improves."

"If the deal is signed off by the EU on November 25, GBP is likely to find some additional support. However, the Pound would still be faced with the very significant risk of the UK parliament not voting through the Brexit deal. Since this would lead to a huge increase in political uncertainty, the Pound would be very vulnerable to a significant downward correction at this point.

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