EUR/GBP medium-term target at 0.87 but plenty of scope for pullbacks for GBP – Rabobank

"The pound has been one of the better performing G10 currency in the year to date supported by both optimism on the economic outlook resulting from the UK’s rapid vaccine roll-out and relief that Brexit is finally complete," note Rabobank analysts.

Key quotes

"On both counts, however, the outlook it still littered with pitfalls.  Brexit is casting long shadows in particular with respect to issues concerning Northern Ireland and the UK’s new relationship with the EU has not started well. "

"On top of that, UK politics could be rocked by the Scottish elections in May which look set to bring strengthened calls for Scottish independence.  On the economy, last November’s pledge by PM Johnson that “things will look different by Easter”  is beginning to appear optimistic."

"Despite the fast vaccine roll-out, mixed messages from ministers hint that some restrictions may remain in place for longer than expected.  We maintain our medium-term target of EUR/GBP 0.87 but see plenty of scope for pullbacks for the pound."