Despite the British pound’s (GBP) muted reaction to the UK election result, the fall in the US dollar (USD) over the past few sessions has allowed GBP to rise to the position of the best-performing G10 currency this year, notes Jane Foley, senior currency strategist at Rabobank.
The GBP/USD pair will grow in the coming months
“GBP showed little reaction to the UK general election results on 4 July, continuing its indecisive stance of recent weeks. With UK politics likely to avoid the drama and uncertainty of the Brexit, Johnson and Truss eras, we expect GBP to continue its slow, laborious recovery.”
“As expected, Labour won a strong parliamentary majority. However, it only increased its share of the national vote by a small percentage. Both markets and the electorate will be watching closely to see whether Labour can consolidate its power. That will depend on whether it can deliver economic growth and improve living standards.”
“We expect EUR/GBP to decline through the end of the year and see increases to 0.85 as selling opportunities. Cable is likely to be exposed to further USD volatility in the coming months due to uncertainties surrounding both US and Fed policy, although we expect GBP/USD to trade in a moderately higher range in the coming months.”
