According to Aila Mihr, analyst at Danske Bank, yesterday’s vote has not changed much for the Brexit outlook and the subsequent sell-off in GBP seems fair in the light of the past week’s rally as uncertainty remains intact.
Key Quotes
“Overall, however, the risk of a ‘no deal’ Brexit still appears to be lower compared to a month ago, which justifies a lower range for EUR/GBP, in our view, and we expect EUR/GBP to stay within the 0.86-0-89 range near term.”
“We maintain the view that it will require further reduction in the ‘no deal’ Brexit risk for EUR/GBP to test and eventually break below 0.86. This could either happen in case of (1) improved odds for Theresa May’s deal being passed in parliament, (2) an extension of Article 50 combined with renewed negotiations between the UK and EU or (3) if a second referendum is called.”
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