UK: Brexit uncertainty and political vulnerability persist – Westpac

More favourable slants to Brexit talks from EU-27 officials, UK’s Davies and PM May have eased concerns over risks of a cliff-edge hard Brexit and raise potential for an agreed transition period, explains Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Both EU and UK seem to be awaiting each other for the next initiative for negotiations to progress towards post Brexit trade talks.”

“A more solid Q3 GDP release, after last week’s soft retail data, has  seen markets price in a reversal of the post-Brexit-vote 25bp cut when MPC meet on 2 Nov. BoE’s Quarterly Inflation Report is also released then and should provide key information for MPC into year end.”

“Despite a better mood, Brexit uncertainty and political vulnerability persist. Markets will also start to focus on the forthcoming autumn budget (22 Nov). These issues should limit GBP rebounds to defining range parameters in both EUR/GBP and especially GBP/USD.”