GBP: Brexit outcome looks binary, but is still cheap - ING
|According to analysts at ING, EUR/GBP has now declined around 4% from the highs seen in late August, largely due to the chances of a 'no-deal' Brexit becoming slightly less likely.
Key Quotes
“We continue to see the GBP proposition as quite binary, i.e. a virtuous circle of less risk premia and rising UK money market rates combining to deliver a positive outcome for GBP – or the vicious opposite. That said, we still think GBP is highly under-valued against the EUR, and we’re not looking for another 15-20% GBP decline in the event of a no-deal.”
“Currently, the market prices around 50 basis points of Bank of England tightening over the next two years and we think that could shift to pricing 100bp – were the withdrawal bill to be approved by parliament. That would certainly be worth a EUR/GBP move to 0.85 in our opinion – but not too much more.”
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