GBP: Not immune to politics - TDS

According to analysts at TD Securities, the UK continues to languish in limbo as risks of a No Deal crash out from the EU have diminished, but sterling has lost much of its sensitivity to “good” Brexit news.

Key Quotes

“This suggests the current political landscape may now be fully priced. Hopes that GBP could see a significant and sustained rally on a positive outcome look overly optimistic.”

“That said, sterling is not immune to politics. The next stage could depend on the outcome of talks between the UK’s two main political parties – and what the price for Labour’s participation in getting a Deal passed may ultimately be. The potential of an early election could surface quickly. This would put GBP under renewed downward pressure, in our view.”

“Against this backdrop, our base case suggests cable’s sideways grind may continue, but near-term directional risks are large and fluid. The positives may be priced but downside potential remains.”