Morten Lund, analyst at Nordea Markets, points out that GBP has rallied on the back of the election result, sending EUR/GBP lower to levels around 0.829.
“Given our expectations of a divorce deal being ratified before 31 January 2020, we expect the GBP to be somewhat underpinned the next month or so. Hereafter, however, we see clear downside risk for the GBP, as focus then switches to the phase two negotiations concerning the more important and probably also more difficult future trade relationship.”
“Furthermore, we do not think the economy will see a big investment boom after a potential divorce deal has been ratified, with key figures continuing to be sluggish. As such, our view on the sterling is more in line with the option market, which is clearly positioned for downside GBP risk in 2020.”
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