GBP: Driven by Brexit – Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the lack of key data in the coming week will mean that Brexit will be even more dominant in driving GBP.

Key Quotes

“Shifting potential for a withdrawal deal allowed for GBP’s recent rebound and coincided with a CFTC leveraged positioning pulling back to neutral. This heightens likely binary responses to whether PM May’s Cabinet support for the recently negotiated exit proposals can be passed by the UK parliament. If passed, GBP should gain sharply on reduced uncertainty even though post Brexit relations are still to be negotiated, potentially from a new starting point.”

“Failure to pass this proposal would likely result in political defeat and departure for May and a likely hard Brexit replacement steering UK into a no-deal Brexit based upon WTO trading rules. UK would need to gain a “most favoured nation” status to then face EU external tariffs and regulations (the latter being the same as current internal specifications). Financial and other services would likely face more stringent specifications.”

“Risks remain high and outcomes for GBP are effectively binary.”