Chief Strategist at Danske Bank Valtteri Ahti assessed the recent developments around the British Pound.
Key Quotes
“In the majors, the GBP saw a short-lived rally, and EUR/GBP fell more than 0.7% in a straight line to 0.8956 on reports that the German government was ready to abandon key Brexit demands and e.g. allow negotiations to continue during the transition phase”.
“However, the news was later rejected and EUR/GBP bounced back above 0.90 again on comments by a German government spokesman saying that the government position on Brexit was unchanged. GBP had a similar rally last week, when the EU’s Barnier said the EU was prepared to offer the UK “the likes of which has not existed before with any third country”.
“What’s interesting at the moment is that the communication from both the EU and the UK appears to be more solution seeking rather than setting up hard lines before final talks. This could help support investors’ appetite for the GBP and reduce the GBP risk premium”.
“We expect the GBP to remain volatile and sensitive to Brexit news in the coming months and, overall, we still see EUR/GBP risks skewed to the upside ahead of the UK Conservative Party’s Annual Congress, which starts on 30 September”.
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