GBP/USD – Brexit Hangover
The British pound was the best performing currency in the first quarter as the UK appeared determined to avoid a no-deal Brexit. After countless failed meaningful and indicative votes, Brexit appears to be headed for a long extension, pending the EU’s approval, but it could be cut short if Parliament is ever able to agree upon an exit deal.
The British economy has felt the effects of Brexit, with many offices leaving and the uncertainty of future trade agreements crippling many businesses. The longer Parliament struggles to make a deal, the longer we will see investors hesitate to invest in the UK.
The Bank of England quietly remains the most likely central bank to raise rates this year. Even if we see the UK end up having a 9 month or longer extension, we could still see the BOE expectations call for a 25-basis point increase by the end of summer.
The currency outlook is just as complicated as the question as to how the UK will leave European Union. In theory, the British pound should be poised for sunny days once a withdrawal agreement is in place, but the uncertainty of what type of trade deals will be made and when everything will take place could see some disappointment in currency moves. Some analysts are targeting cable to rally to 1.36-1.40 on a deal announcement, but uncertainty remains high on if and when that could happen. Risks are growing to the downside, but for now, there remains no base scenario on how this will turn out.
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Ed Moya
His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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