NAB Research discusses GBP outlook around the the Dec-12 UK Elections.
GBP has had a good run; rising near 8% on a tradeweighted basis from the bottom of its post EU referendum vote range to the top...Boris Johnson’s new Withdrawal Agreement with the EU raised the prospect of a clean deal in late October or early November. We thought that possible, in which case GBP/USD would have risen to 1.33-1.36 with EUR/GBP falling to 0.83500.8500 in our view, but more likely we would see another Article 50 extension. GBP hence sits shy of those levels ahead of the 12th December general election," NAB notes.
"We remain constructive on GBP. We expect the parliamentary majority against a No Deal exit to persist post-election and the Tories are suggesting they will anyway rule out a No Deal route in their manifesto. We could hold our forecasts flat, but rather believe the factors driving the election will continue to play to a Tory majority. As those dynamics unfold we see GBP moving back up to the levels, before a pause while issues such as the ultimate length of a transition deal are assessed (there is a provision in the Withdrawal agreement for this to be extended for a further two years, which we believe stands a chance of being activated)," NAB adds.