GBP: Driven by the Brexit deal outcome - Westpac

According to Tim Riddell, Research Analyst at Westpac, GBP is being driven by whether or not a Brexit deal can be struck to enter a prolonged “transition/implementation/negotiation” period.

Key Quotes

“Failure to achieve a workable deal could lead to a disruptive “no-deal”/cliff-edge departure or even political fallout and an election.”

“Polling, despite some recent Tory gains, is extremely tight, so the current gov’t will wish to avoid an election that might lead to a Corbyn-led Labour victory (seen as GBP-negative).”

“Recent surveys highlight that uncertainty over Brexit is weighing on business and consumer confidence.”

“Data over the coming week may reflect some of these concerns, but GBP will remain more vulnerable to whether a deal is achieved (GBP-positive), delayed (GBP heavy) or fails (GBP-negative). Although bias may be for an imminent deal (lifting GBP/USD towards 1.32) risks remain high and outcomes for GBP are effectively binary.”