Brexit can be a huge disruptive force for GBP in 2018 - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, suggests that Brexit has the potential to be a huge disruptive force and a continued source of volatility for GBP in 2018.  

Key Quotes 

“Having announced that the UK had made sufficient progress on the three legacy issues (related to the Irish border, the divorce bill and the rights of EU citizens), PM May has won approval from the EU27 for EU/UK trade talks to commence.  The negotiations are expected to initially concentrate on the transitional phase which will kick in immediately after the start of Brexit on March 2019.”

“The tone of these talks and the extent to which May is able to rally her cabinet behind her will be crucial in setting the tone for GBP in 2018.  While we would not rule out a move towards the EUR/GBP 0.95 area during the course of 2018 on the back of concerns about the UK/EU trade talks, we have pencilled in a sharp drop for EUR/GBP on a 15 month view.  This assumes that the politicians do manage to put in place a best case free trade deal, but that an agreement is again of the last minute variety.”