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According to Jens Peter Sørensen, Chief Analyst at Danske Bank, focus today will be on the Bank of England’s stress test for GBP, which includes Brexit scenarios.

Key Quotes

“The report is scheduled to be released in the afternoon and is likely to be pivotal for GBP appetite during the US and Asian sessions. The BoE’s Carney is due to speak after the release.”

“In terms of Brexit, focus remains on the House of Commons’ arithmetic, where, according to some media sources, 100 Conservative MPs have said they will vote against the deal on 11 December. Hence, it still seems very difficult for Theresa May to find a majority for her Brexit deal, which leaves the path towards Brexit extremely muddy and according to Bloomberg, the government has dropped its plan to prevent other lawmakers from trying to rewrite the Brexit plan. This means that the Commons will vote on a series of amendments to the government’s motion on 11 December, which is likely to include calls for another referendum, or for a different deal with the EU. Hence, even if the Brexit deal is voted down on 11 December, it might not directly lead to a ‘no deal’ Brexit as there could be more votes in the House of Commons (possibly in January).”

“Voting will start at 19:00 on 11 December. We recommend hedging GBP income by buying 25-30 delta EUR/GBP call options.”