GBP risks embedded in price already? - Nomura
|Analysts at Nomura explained that politics will remain a factor, but most negatives are in the price of GBP.
Key Quotes:
"Until the passing of the Queen’s speech votes (28 and 29 June), GBP will likely continue to suffer from the political uncertainty caused by the lack of a deal agreed with the DUP."
"However, that’s already embedded in the price. What has not been noticed as far as we can tell is that the UK negotiations kicked off with a compromise on the UK side. The UK’s insistence on discussing both the exit and future relations at the same time was quickly rolled back on and may signal smoother talks than the market fears."
"That’s a discussion to be had in a few months’ time though. For now it’s about the BoE once again."
"Pricing has quickly reverted back to a more balanced view of a possible stimulus removal to a level before Mark Carney’s Mansion House speech. Now that internal member Andy Haldane may join the external member dissenters in voting for a rate hike in August, the question is how many other internal members will join him. Given Governor Carney’s stance, an August rate hike is unlikely scenario, but further hawkish shifts in the BoE board are possible."
"The BoE agency survey released today suggests the more benign view among less dovish board members has good grounds. It may prove wishful thinking and incoming data, especially wages, will be crucial for any further shift in the BoE’s policy stance, but for the time being the market has some serious questions to ask about the BoE outlook which is a stark difference from the “on hold for the remainder of Brexit talks” view of this morning."
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