The Conservative Party is the big winner of the UK election. In contrast to all pre-election predictions, the Tories have won an absolute majority in parliament and will form the government for the next five years.
This will secure a more stable political outlook, but Brexit will be a market theme and a long-term risk factor. Fundamentally, we still expect growth to rebound in the coming quarters and expect the Bank of England to hike in November. GBP rallied on the surprise result - we see further EUR/GBP downside in the coming months but watch out for short-term corrections higher.
We have revised our 1M and 3M (NYSE:MMM) EUR/GBP and GBP/USD forecasts slightly higher following the price action of past weeks and as we believe the current USD correction may have further to go. We still target EUR/GBP at 0.69 in 6M and 0.71 in 12M while we now see GBP/USD bottoming at around 1.48 in 6M.
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