In view of FX Strategists at TD Securities, the Sterling could appreciate vs. some peers in the medium term.
“The economy remains in relatively robust shape, but with Article 50 triggered, there are risks on the horizon. Inflation remains FX-driven and household spending (the only driver of growth in 2016) is sagging on falling real income, keeping the BoE on hold until Brexit clarity emerges. A slight hawkish pivot recently does not reflect the majority of the committee but they are comfortable with the upward slope of the yield curve”.
“With A50's activation, Brexit is now official. Negotiations will get off to a slow start, however, and this will remain a slow-burn risk for GBP. For now, the UK's resilient economy continues to support sterling. We downplay risks of a near term BoE tightening, but perceptions of this should help keep GBP firm, particularly on some key crosses. Look for GBP to rally against the CAD, AUD, and NOK as well as some rebound vs. EUR”.
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