Jane Foley, senior FX strategist at Rabobank, notes that the Telegraph is this morning reporting that PM Johnson is prepared to launch legal action to ensure that the UK can leave the EU on October 31 even if no deal is in place.
Key Quotes
“According to the Telegraph several sources have indicated that the PM is willing to go to the Supreme Court to avoid asking for an extension.”
“In the week ahead GBP will remain hostage to news on Brexit. That said, concerns about economic headwinds have also been having an increased impact on UK asset prices recently. Consequently, UK August GDP and production data will closely be watched this week.”
“Brexit negotiations are continuing in Brussels today and consequently the pound remains suspended in limbo with investors waiting for either positive or negative news. This morning’s modest downside pressure on GBP likely reflects the Telegraph report and the fear that the Benn Act may not have totally diminished the risk of a no deal Brexit at the end of this month.”
“While politics is the overwhelming driver for the pound, there is evidence that UK investors have become more wary about the economic headwinds blowing across the UK.”
“There is clear evidence of weakness in the UK production and construction sectors. The larger services sector has been more resilient and the consumer has been supported by strong levels of employment.”
“It is our central view that Brexit will be delayed until January 31. While a delay may facilitate an election, this may not bring a solution for the UK. We expect EUR/GBP to be holding close to 0.90 on a 3 month view.”
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