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Danske Bank analysts point out that Brexit has returned to the headlines, as Theresa May’s premiership is coming to an end and cross-party talks have broken down.

Key Quotes

“A new (pro-Brexit) Prime Minister would not change the arithmetic in the House of Commons. It is difficult to predict what is going to happen, especially looking beyond the near term.”

“Our base case is that a further Brexit extension beyond 31 October may be needed given the new Prime Minister will need time to settle but this is not a high conviction call.”

“The GBP has weakened, which is fair given the uncertainty and that the likelihood of some of the GBP negative scenarios (e.g. no-deal Brexit) has risen.”

“Near term, we do not expect a convergence towards one of the many Brexit outcomes and, hence, we expect very limited further weakness in the GBP. Rather, from the current level, small changes in the perception of the possibility of a softer Brexit could cause a non-linear reaction in favour of GBP strength.”