GBP: Still too early to price any Brexit transitional deal hopes - ING
|The growing consensus within PM May's cabinet for a post-Article 50 transitional arrangement is indeed good news for GBP in the broad scheme of things, feels Viraj Patel, Research Analyst at ING.
Key Quotes
“A two or three year “implementation phase” starting in April-19 would avoid the risk of a cliff-edge Brexit – that is trade between the UK and EU defaulting to WTO rules, which is arguably one of the biggest uncertainties clouding GBP markets. The question for us, however, is whether it is too soon for markets to begin pricing in such a scenario.”
“In our view, yes; while the wind may be blowing in the direction of a transition deal, recent Brexit negotiations highlighted the number of “divorce” stumbling blocks that need to be overcome before any transitional arrangement is signed, sealed and delivered. Until then, we think GBP will continue to trade with a negative bias; 2Q UK GDP data is set to confirm a weak quarter of activity (we expect +0.3% QoQ), which should dent hopes of a 2017 BoE rate hike.”
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