Valtteri Ahti, chief strategist at Danske Bank, points out that EUR/GBP cross remains relatively steady just below the 0.90 level and especially 0-1M EUR/GBP and GBP/USD vols have plummeted as Brexit uncertainty is expected to drag on.
Key Quotes
“We expect EUR/GBP to remain trapped in the 0.88-09050 range in the short term, which could push volatility on short-dated tenors down further. Meanwhile, pressure on Theresa May continues to increase as Jeremy Corbyn of the UK labour party has now threatened to call for vote of ‘no confidence’ in her following her statement that MPs would not vote on her Brexit deal until the week of 14 January.”
“If triggered, EUR/GBP could be in for a test of 0.91 near term. We still recommend hedging GBP income/assets via bought vanilla options.”
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