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According to analysts from Danske Bank, the most likely scenario is a “decent” Brexit and they point out that it is difficult to see a much stronger GBP without more clarification.  

Key Quotes:  

“Get ready for the Brexit end-game, which takes place in Q4, as the EU and the UK must strike a deal ahead of the formal exit date on 29 March 2019, as both sides need time for ratification. The negotiations are complicated because there is no majority for anything in the UK. Roughly 50% want to remain within the EU while the 50% that want to leave the EU are divided between those who want a soft exit and a hard one. The Conservative Party conference from 30 September-3 October is a key event in this regard.”

“We still expect the most likely outcome to be a ‘decent Brexit’, where we get a deal keeping the UK close to the EU, in particular on goods trading, although leaving the EU single market. That said, the likelihood of a ‘no deal Brexit’ has increased following the departure of prominent Brexiteers from the cabinet.”

“While GDP growth remains slightly above trend growth and the Bank of England has started a hiking cycle to cope with the tight labour market, we still think the key driver for GBP is Brexit. Until we get more clarification about what Brexit really means, it is difficult to see a much stronger GBP.”