(11 SEPTEMBER 2018)DAILY MARKET BRIEF 2:Pound up on Brexit optimism
11 September 2018, 14:06
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Brexit continues to grab attention: still unsolved are the customs union and the Irish border. A pound rally remains driven by talk, thus driving currency volatility higher. For now the trend is positive, with the pound bouncing back from its August low as the EU signalled an imminent deal, a change from prior discussions in July. Although the interpretation is that the EU is becoming more conciliatory, we see no real revelation. Indeed, the timetable for a deal is still 18 October 2018, period during which the EU will have to ratify the deal before official Brexit day on 29 March 2019.
We remain sceptical that current GBP relief will be sustainable, as both sides are likely to stick on important details. We also expect the Bank of England’s meeting this Thursday to be a non-event. The central bank already increased its bank rate 0.75% six weeks ago. Little has changed since then. GBP/USD currently trades at 1.3065, bouncing from its mid-August low, heading along 1.31 in the short-term.
We remain sceptical that current GBP relief will be sustainable, as both sides are likely to stick on important details. We also expect the Bank of England’s meeting this Thursday to be a non-event. The central bank already increased its bank rate 0.75% six weeks ago. Little has changed since then. GBP/USD currently trades at 1.3065, bouncing from its mid-August low, heading along 1.31 in the short-term.
By Vincent Mivelaz
