Aila Mihr, analyst at Danske Bank, notes that the EUR/GBP cross moved higher yesterday, as the EU leaders discussed whether to grant the UK an extension or not.
Key Quotes
“Leaks from the discussions among the EU leaders suggested that they are more hawkish on Brexit than Tusk, Juncker and Barnier – as we highlighted in our daily yesterday. There was not really any movement after the meeting concluded, as in reality, the discussions we have had over the past two weeks will just continue for a few more weeks.”
“If a deal passes, we still expect EUR/GBP to move lower towards 0.83, as markets can price out the immediate no deal Brexit risk premium. If we end with a long extension, EUR/GBP should move slightly lower but continue trading in the 0.85-0.87 range. If we end up with a no deal Brexit, EUR/GBP will move towards 1.00.”
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