ING analysts suggest that the path ahead this week is a rocky one and of the five big hurdles this week, the best chance of a GBP rally may come earlier in the week – were the government to find support for the second reading of its WAB.
“Signs that parliament could finally agree on a Brexit deal would see Boris Johnson go one step further than Theresa May and should be enough to drive EUR/GBP under 0.8500 – i.e. into a new trading range. GBP/$ could see 1.32/34.”
“However, the biggest threat GBP faces this week could be the committee stage discussions of the legislation. This may well start on Wednesday and see a variety of amendments introduced. We doubt amendments calling for a second referendum will have the numbers, but the desire to remain in a customs union could prove much closer.”
“Were a majority in parliament to back an amendment forcing the government into negotiating customs union access as part of the trade talks, the European Research Group’s support for the whole WAB could easily fall away as would the government’s fragile coalition for a deal – and GBP could hand back a decent part of recent gains. Given the market is still substantially short GBP, that might only see Cable come back to 1.2700 area – and the softer dollar environment may also limit the size of Cable’s correction here.”