EUR/GBP to move towards 0.88 by late-2021 – Rabobank

The EUR/GBP pair is set to move toward 0.88 at the end of the year as the UK’s rapid vaccine roll-out can lessen the British economic damage caused by covid restrictions, per Rabobank. 

Key quotes

“It is not our central view that the BoE will announce a negative Bank rate. Aside from the arguments debating the pros and cons, given the clear resistance of various members it may now reek of a last-ditch measure – a situation which the BoE would probably want to avoid. This, however, doesn’t mean that the debate will cease.”

“The UK’s rapid vaccine roll out should bring respite to the UK economy later in the year. That said, relative to its G10 peers the UK economy has been hit hard by the crisis.”

“This week the EU and UK are starting talks to secure a memorandum of understanding on regulation for financial services. This is expected by March, though newswires are reporting that the EU is in no rush to grant the UK equivalence as it tries to secure more business for itself. These talks suggest that echoes of Brexit will remain an influence for the pound in the coming months.” 

“While economic uncertainty and speculation over policy are likely to leave GBP vulnerable in the coming months, assuming a bounce in the UK economic outlook we see scope for a move towards EUR/GBP 0.88 towards the latter part of the year.”