Brexit & FX Outlook 2020
Will this New Year mean a New Brexit?
- 2019 was all about parliamentary battles over Brexit, 2020 is looking to be less so with a conservative majority in place.
- The state of UK data, here and now, is not great, but we think the BoE will introduce policy to fix this.
- We could see the pound raise to a level of $1.40 or $1.41 by year's end if a hard Brexit is avoided.
"2019 was all about parliamentary battles over Brexit, 2020 looks positive as we move on with a conservative majority making the impacts of Brexit less market moving."
However if we look at the state of UK data, its not that great , UK growth is below trend and falling quite fast, UK inflation - it's below target and falling further still, and we are now starting to see the historically strong UK labour market having a few cracks such as wage pressures.
But that's the here and now, markets look to the future . And we are starting to see, on global scale, the worst of the growth data under-performance is behind us. The below target growth has started to see signs of picking up, in both the European and US data, or indeed the new orders of the UK PMI data.
What this means around the pound is that we have risks around the BoE , risks around the the UK budget and risks over Brexit. But if the green shoots in the data pick up and turn into a trend, this should see the pound start to out perform.
For a more in-depth analysis of our 2020 forecast, read our full outlook here.
Contributor
Jordan Rochester
FX Strategist
Disclaimer
This content has been prepared by Nomura solely for information purposes, and is not an offer to buy or sell or provide (as the case may be) or a solicitation of an offer to buy or sell or enter into any agreement with respect to any security, product, service (including but not limited to investment advisory services) or investment. The opinions expressed in the content do not constitute investment advice and independent advice should be sought where appropriate.The content contains general information only and does not take into account the individual objectives, financial situation or needs of a person. All information, opinions and estimates expressed in the content are current as of the date of publication, are subject to change without notice, and may become outdated over time. To the extent that any materials or investment services on or referred to in the content are construed to be regulated activities under the local laws of any jurisdiction and are made available to persons resident in such jurisdiction, they shall only be made available through appropriately licenced Nomura entities in that jurisdiction or otherwise through Nomura entities that are exempt from applicable licensing and regulatory requirements in that jurisdiction. For more information please go to https://www.nomuraholdings.com/policy/terms.html.