GBP: Is the recent rally reflecting optimism over a 'soft' Brexit - ING

Sandeep Kanihama FXStreet Contributor

Viraj Patel, Foreign Exchange Strategist at ING, suggests that the recent rally of GBPUSD is reflecting optimism over a 'soft' Brexit for sure, while they agree that there has been a positive re-assessment of the Brexit tail risks since last December’s Divorce Deal – we shouldn’t get carried away at overstating this effect on recent currency moves.

Key Quotes

“GBP/USD’s rally above 1.40 earlier this year had little to do with anything GBP-specific; we point to the fact that the 6-month correlation between GBP/USD and EUR/USD picking up to its highest since the Brexit referendum (~0.55) – which suggests that this has predominantly been a weak USD story (and therefore little evidence to cite GBP’s rally as being Brexit or UK-specific). If anything, the reduction in Brexit tail risks has merely allowed GBP to participate in the upside amid a weakening USD environment.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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