Over the space of a week, we've had 3 key UK events and 3 muted reactions in GBP markets; the cumulative reaction to (1) the BoE's Brexit-contingent hawkish signal; (2) the positive UK inflation surprise (which confirmed the Bank’s hawkish signal); and (3) a fairly inconsequential speech by Boris Johnson – was a 0.5% move higher in GBP against both USD and EUR, explains Viraj Patel, Research Analyst at ING.
“That’s a pretty tame reaction – even by the Brexit-impaired pound’s standards and to us, suggests that there is only one thing on the minds of GBP investors right now – and that’s clarity over a Brexit transition deal. The period leading up to the 22-23 March EU leaders summit will be noisy – but GBP’s relative resilience is telling of a different Brexit trading environment to what we saw in 2017. Look for GBP/USD to consolidate around 1.40 – with deferred upside on an agreed transition deal.”
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