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Analysts at TD Securities point out that the political drama reaches a fever pitch in Europe after a few cabinet resignations inject more fluidity in the daily Brexit negotiations.

Key Quotes

“The next questions center on whether there will be a leadership challenge to May this week followed by a possible snap-election, a hard Brexit or even a second referendum.”

“The former requires 48 letters to the Chair of the 1922 Committee to trigger a leadership contest, though we think May will hold on to power.”

“If the tails risks of a snap election or hard Brexit are averted, we see room for GBP to chew into its heavy risk premium, which favors buying into dips near 1.32. EURGBP likely to find intraday support near 0.8830.”

“Still, the improving growth backdrop suggests EURUSD offers a cleaner play in the very short-run and we prefer to use dips as buying opportunities towards the 1.1680/50 zone.”