The pound is on the back foot
Here is their view, courtesy of eFXdata:
MUFG Research discusses GBP outlook in light of the current heightened state of political uncertainty in the UK which was again evident in the weekend press.
“In what feels like groundhog day, there were fresh reports over the threat of a potential leadership challenge in the week ahead. Prime Minister Theresa May is under pressure to attend a meeting of rank and file lawmakers, called the 1922 committee, on Wednesday to explain her Brexit strategy,” MUFG notes.
“It would be a risky strategy to attempt to remove Prime Minister May at this critical stage in Brexit talks. It could be interpreted by the public as putting internal party politics above the national interest. If successful, the new Prime Minster would still find themselves in the same bind. The Irish border backstop would still need to be resolved, and there is no majority in parliament for a hard/ “No Deal” Brexit.
For now the pound is willing to look through the heightened political uncertainty in the UK which is reflected by continued stability. However, we would expect the pound to come under more downward pressure if a leadership challenge ever materialized at this crunch stage of Brexit talks. It would interpreted initially as a more destructive rather constructive development for Brexit negotiations,” MUFG argues.
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