In view of Viraj Patel, Research Analyst at ING, price action in recent days suggests that their labelling of the pound as a “trashy currency” wasn’t just a tongue-in-cheek reference.
“In a noisy environment, it’s difficult to make any fundamental case for short-term price variations. But it’s clear that the immediate focus is on whether a divorce deal with the EU can be agreed. Media reports suggest that the EU’s Michel Barnier has given PM May 48 hours to come up with a solution to the Irish border, otherwise talks will remain in deadlock phase.”
“The failure to move forward would be partially damaging to the pound (GBP/USD to 1.32), but we do think that markets are becoming well versed with the idea that Brexit won’t be solved overnight. We see Brexit talks moving away from impasse (even if it is in 1Q18). This will be GBP positive.”
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