Analysts at MUFG Bank, consider that the relief rally seen recently in the Pound is likely to prove short-lived unless a last-minute Brexit deal is passed in UK parliament.
Key Quotes:
“The pound has been rebounding recently reflecting relief that more immediate “No Deal” Brexit & UK recession fears have eased.”
“The pound has staged an impressive rebound over the past week. After cable hit an intra-day low of 1.1959 on the 3rd September, it has climbed back to within touching distance of the 1.2400-level. Similarly, EUR/GBP hit an intra-day high of 0.9149 on the 3rd September, and has since fallen back towards the 0.8900-level.”
“We had highlighted that there was more two way price risk for the pound in the near-term. It has brought an end to the relentless pound sell off which took place between May and August. However, we believe there is only limited scope for the pound to extend its advance at the current juncture with UK political and Brexit uncertainty set to remain elevated in the coming months.”
“Cable should run into strong resistance between 1.2500 and 1.2600, and EUR/GBP will find support from the 200-day moving average which comes in at just below 0.8850.”
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