Reassessing GBP and EUR after the “leave” vote – RBC CM
|Adam Cole, Research Analyst at RBC Capital Markets, suggests that pre-referendum, they suggested three main channels for an exit vote to drive FX: independent GBP weakness, direct contagion to EUR and global risk appetite.
Key Quotes
“Despite the magnitude of the selloff already seen, the risks for GBP are still to the downside and 1.20-1.25 is now our objective for GBP/USD in late-Q3.
Despite EUR’s apparent resilience, our direct estimate of the breakup risk premium is now trending wider and further widening should see parity in EUR/USD tested in Q3.
The shock to global risk appetite is likely to prove more transitory in nature, compared to the durable negative impact on GBP and EUR.”
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