GBP: Rebounds should be capped by Brexit negotiations and uncertainty - Westpac

Tim Riddell, Research Analyst at Westpac, notes that the Carney’s comments to parliament soothed GBP, but rebounds should be capped by persistent concerns over the prospects of Brexit negotiations and uncertainty over investment intentions.

Key Quotes

“Although BoE takes into account sharp GBP moves, its weakening remains part of the easing mix, as Carney stated.

BoE may not add more QE on 3 Nov, but the level of uncertainty overhanging the economy (n.b. poor CBI trends) should keep BoE’s accommodation stance and easing bias firmly in place.

As previously noted, GBP weakness should persist into the government’s Autumn Statement (23 Nov) and squeezes are likely to be limited.

That said, 1.18-1.20 does now appear to be providing an area of support, assisted by Carney’s awareness of sharp moves.”