The insistence on making good on the transition deadline by the end of this year from the UK government has led analysts at TD Securities to believe that not enough of a risk premium is priced in GBP.
Key quotes
“The UK government remains insistent and outright defiant in that the transition period will end by December 31st despite the fact that their negotiating counterparts have offered to extend the deadline given the extenuating circumstances associated with the pandemic.”
“The implication here, FX markets are not reflecting enough risk-premium in GBP.”
“Tactically, cable looks vulnerable to test 1.2150/70 support. As such, EUR/GBP looks very much ripe to extend its bounce off the 200dma; 0.8860/70 next level up followed by a more extended follow-through towards 0.90 in the coming weeks.”
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