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Westpac: Buy Pound Sterling Weakness against the Euro

Foreign exchange

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Foreign exchange strategists at Westpac - the Australia-based international investment bank - have told clients they see value in buying Sterling against the Euro.

To be more specific, they see value in buying the Pound when the GBP/EUR exchange rate falls towards 1.15.

The rationale behind the call rests with the latest political developments in the UK, which ultimately point to a Brexit resolution and more government spending which should aid economic growth.

The call was made on the day the UK Parliament voted overwhelmingly for an election to take place on December 12, after Prime Minister Boris Johnson argued Parliament required a reshuffle to break a chronic impasse on Brexit.

"Parties are likely to adopt post election expansionary mandates to allow for investment, spending and growth," says Robert Rennie, Head of FM Strategy at Westpac Institutional Bank. "The election will be an effective poll on current negotiated deal against remaining and/or second referendum."

Looking at the Euro side of the equation, Rennie looks for the Eurozone to receive further weak data in coming week, while the Eurozone authorities in Brussels will "will look to approve fiscally prudent National budget proposals in November rather than push for any
expansion."

The trade targets a move higher in the GBP/EUR exchange rate to 1.1940.

The exchange rate is currently quoted at 1.1593, as a sideways trajectory extends in the short-term.

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