- The Brexit uncertainty remains the biggest challenge for UK politics and the biggest drag on Sterling heading into 2019.
- Sterling is expected to weaken at the beginning of 2019 and rebound sharply after the Brexit uncertainty fades away.
With the UK government still working its way to the UK parliament with the Brexit agreement approval, the Brexit uncertainty is set to prevail the end of 2018 and the beginning of 2019. The 2019 GBP/USD Forecast is highly dependent on the result of the Brexit deal going forward and with no fundamental bias, all options are still on the table leaving different GBP/USD scenarios all applicable.
Sterling could fall past 1.2000 level that historically frames the bottom and serves as a territory of rebound for GBP/USD in case of hard Brexit. The rational solution for all involved parties in the UK parliament, the UK government and in the EU should be to avoid the scenario of no-deal Brexit that would throw the UK economy and Sterling into disarray with the Bank of England saying the bottom for Sterling would be some 25% lower from here, indicating sub parity levels for GBP/USD. Also, no transition Brexit would represent an adverse scenario for Sterling with falling to the lowest level since 1985 of 1.0700. Such scenarios are still considered unlikely. Should such scenarios materialize, it is almost a sure-shot for traders to experience the deal of the lifetime while buying GBP/USD at historical or/and cyclical lows.
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