GBP: Moving from dystopia to normality but expect a noisy week of speeches - ING

Viraj Patel, Research Analyst at ING, explains that it’s clear to them that the weak and almost ‘half-life’ like pound is looking for any positive reason to transform into a better version of its self, with the currency’s resilience of late indicative of a different Brexit trading environment relative to the more dystopian-like one observed over 2017.

Key Quotes

“Part of this new environment is seeing GBP investors opting to trade off Brexit facts rather than Brexit speculation – with the latest CFTC positioning data showing that real money investors did not add to their net short GBP bets, despite the prospect of heightened Brexit uncertainty in the coming weeks.”

“Such context is important ahead of what is seemingly a pivotal week of Brexit speeches for GBP markets – with both opposition Labour leader Jeremy Corbyn (today) and Prime Minister Theresa May (Friday) set to lay out their respective visions for the future UK-EU trading relationship. ‘Customs union’ will be the buzzword of the week and it’ll be interesting to see whether Labour’s position of ‘full tariff-free’ access to EU markets – which would be the effective consensus within the House of Commons – would force the PM to seek a similar free-trade agreement. Still, while one can expect a lot of Brexit huffing and puffing this week from UK politicians, real money GBP investors will wait for the facts – and here the European Commission’s response to PM May’s speech may be equally as important. Expect some choppy GBP trading – with the risks modestly tilted to the upside. GBP/USD supported above 1.40; EUR/GBP risks to 0.87 this week.”