The EU Summit starting on March 22nd may certainly be a market-moving event. A deal on the transition can have a significant impact. Here is the view from Bank of America Merrill Lynch.
Here is their view, courtesy of eFXnews:
Bank of America Merrill Lynch Research discusses GBP/USD outlook and notes that could be a big week for GBP next week with the release of key macro data (CPI, labour market and retail sales data) and the EU Summit on 22/24 where the focus will be on whether a potential transition agreement will be finalized.
“Front-end cable implied volatility is likely to remain elevated ahead of the summit and with a heavy calendar for data. But we would not place too much emphasis on the failure to reach an agreement on transition. The EU Summit does not present a definitive deadline for markets and given that both sides agree that such an agreement is necessary, we remain confident that a deal will ultimately be reached.
As we have stated in the past, we think confirmation of a transition agreement will help cable sustainably trade in a higher range (1.40+) as it allows markets to put Brexit on the back-burner for the immediate future and focus on the UK rate outlook,” BofAML argues.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.