Despite a tricky month of politics for GBP, speculation of a Bank of England rate hike has provided a backstop to the currency sliding lower. As long as the 'Carney put' stays in place, we remain constructive on GBP heading into year-end and look for GBP/USD at 1.35-1.36 on a steeper UK rate curve.
GBP/USD year-end target under a steeper UK rate curve
We look for GBP/USD at 1.35-1.36 over the next month as the front-end of the UK rate curve steepens, while speculation of additional BoE rate hikes should prevent any meaningful move below 1.30. For EUR/GBP, we remain comfortable with the 0.88-0.90 trading range for now. We're not exactly shooting for the stars because we're aware of the Brexit-related risks stemming from the December EU summit – which could be a make-or-break moment for GBP.