GBP: Guided by the UK politics – Danske Bank

According to Vladimir Miklashevsky, senior economist at Danske Bank, GBP will be guided this week by the indicative vote in the UK House of Commons on Wednesday where the PMs once again have the opportunity to force the Prime minister to ask the EU for an extension of the Article 50.

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“PM May has postponed the socalled “meaningful vote” which was scheduled for Tuesday 26 February. Instead, PM May will ask the House of Commons to give her another two weeks (12 March) to close the deal. Hence, the can will most likely be kicked down the road once again this week, which should keep EUR/GBP within the 0.86-0.89 range in the coming weeks.”

“We maintain the view that the risk of a ‘no deal’ Brexit after 29 March is low (although it still could happen by accident), which is also reflected in level of EUR/GBP, in our view.”

“We still expect EUR/GBP to decline sharply towards 0.83 if a deal is reached before 29 March, but the main risk is that Article 50 is extended, which means that GBP appreciation will come more gradually than our forecast indicates.”