Analysts at ANZ note that the GBP/USD is undervalued on a number of different measures, but Brexit uncertainty justifies that.
Key Quotes
“It is not about ‘economics’ right here. In fact, sterling failed to react to the BoE lifting its policy rate recently to 0.75%.”
“The deadline for exiting the EU is less than seven months away but no workable plan is yet in sight (and that plan would also need to be ratified by all 27 member states – which of course takes time).”
“The main sticking point for the withdrawal agreement appears to be the Irish border. Some compromise is going to be necessary, but there is no guarantee we will see that. A trade agreement seems much further away, but that is less of a pressing issue.”
“At the moment, the FX market is in limbo awaiting clarity (one way or the other). And so until we get that, GBP/USD (and probably by default NZD/GBP) is set to trade in a choppy range, jumping on each new headline.”
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