GBP has rallied by more than 1% overnight on reports that the UK and EU have in principle agreed a Brexit Divorce Bill – with a figure of EUR 60bn being floated around as the net liabilities the British government are willing to pay, notes Viraj Patel, Research Analyst at ING.
“While this stage of the negotiations has little economic significance for sterling, the news of a breakthrough in talks has profound political significance for a currency that is pricing in a lot of bad news.”
“We do foresee a ‘gentlemen’s agreement’ over a transition deal as being a bigger positive catalyst for GBP down the road, but for now we hold the view that small steps forward are helpful for UK asset prices. We now have greater conviction over our year-end target of 1.36 for GBP/USD.”
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