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According to Mark McCormick, global head of FX strategy at TD Securities, Brexit news has dominated headlines, as the UK/EU have reached a deal.

Key Quotes

“Sentiment has trumped fundamentals, reflecting the fact that GBP now sits 2.5-sigmas from HFFV. Still, we note that there’s a major rub to this deal, as it needs to pass the UK parliament Saturday. That’s unlikely and the result of a failed agreement brings us back to the prospects of a general election later this year.”

“Still, one of the major developments has been the reduction of no-deal tail risk. That’s part of the reason GBP has decoupled from short-term drivers. Our suite of LFFV models implies an 11% discount in GBP, highlighting a Brexit premium that is likely to get priced out if we start to get closure on the three-year saga.”

“For the rest of the G10, the market prefers to run with the weak USD theme. As we noted yesterday, we see some nice discounts on offer in the antipodes and the scandis. This group looks attractive against CAD ahead of next week’s election. USDJPY rallies look capped ahead of the 200dma while the UK Parliament vote to decide the fate of the EUR over the coming days.”