GBP: Guided by the Brexit developments – Danske Bank

Piet P.H. Christiansen, senior analyst at Danske Bank, suggests that in the current environment, GBP remains in the hands of Brexit and at the moment, EUR/GBP seems stuck in the 0.85- 0.87 range.

Key Quotes

“As an extension is already more or less priced in at this point, we expect any decision on (at least on the principles of) an extension will only be marginally positive for the GBP and EUR/GBP should remain above 0.85, in our view.”

“If EU27 rejects an extension, which we cannot rule out given the more hawkish Brexit stance among EU27 leaders compared to the EU Commission (10% probability), we should see EUR/GBP break above 0.87, as markets will start pricing in a higher risk of a no deal Brexit again. It remains our base case that the most likely Brexit outcomes are GBP positive but the next significant move lower in EUR/GBP depends on when we will get clarification.”