Analysts at MUFG Bank, point out that the Pound recently received support from some optimism about a Brexit deal. They warn there are major hurdles to it yet.
Key Quotes:
The pound continues to derive support from building optimism over the prospect of a last minute Brexit deal stemming from reports that the UK government is working on a type of Northern Ireland-only backstop to ease concerns over a hard border in Ireland.”
“We still believe there are major hurdles to a last minute deal. Will the UK government’s proposal go far enough to satisfy the EU’s concerns over a hard border in Ireland? Even if a last minute deal is reached with the EU, can it win sufficient support to be passed in parliament? We have doubts on both fronts. Evidence of progress on both fronts will be required for the pound to build on recent gains. If it proves elusive, the pound could quickly start to reverse course.”
“The pound remains close to recent highs after cable hit an intra-day high of 1.2523 overnight and EUR/GBP fell to an intra-day low of 0.8856. The pound has now run into stronger technical resistance levels between 1.2500 to 1.2600 for cable where the July highs are located, and support at just below 0.8550 for EUR/GBP from the 200-day moving average. It should make further near-term gains more challenging for the pound after its recent sharp rebound.”
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