The pound jumps and falls on central bankers’ musings. What’s next?
Here is their view, courtesy of eFXnews:
BTMU FX Strategy Research holds an optimistic assessment of the Brexit negotiations moving toward a favorable transition phase (2yrs perhaps) beyond the current end-date of negotiations currently set at 29th March 2019.
“We believe it is in the interest of both sides to ‘dial-down’ that cliff-edge date and by focusing quickly on a transition deal that effectively will mean the UK remaining in the Single Market for longer is a scenario we see as becoming the “reality of Brexit negotiations” perhaps by Q1 or Q2 2018.
For this reason, we had pencilled Feb 2018 for a first rate hike by the BoE,” BTMU argues.
As such, BTMU concludes that the downside for the GBP from here should be limited given the prospect of a favorable transition deal and given that scenario is also the assumption of the BoE that prompted a conclusion in the QIR that rates may need to move higher than the financial markets are currently assuming.
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