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Jane Foley, senior FX strategist at Rabobank, points out that the UK pound has seen further gains in today’s session in addition the last Friday’s surge as perceived risks regarding the prospect of a no deal Brexit have strengthened further.

Key Quotes

“Friday’s move in the pound was sparked by press reports that a few members of PM May’s cabinet would be prepared to resign in order to support backbench amendments which would have the effect of taking a no deal Brexit off the table.”

“This morning GBP has been lifted again on a Daily Mail report that PM May will rule out a ‘no deal’ Brexit after 15 ministers threaten to revolt.     The report has strengthened the consensus view that the UK will avoid going over the cliff edge into a hard Brexit on March 29.”

“Another factor supporting the pound this morning is the news that the Labour party would support a second Brexit referendum if the party’s Brexit plan was not supported by parliament.”

“The spate of reports in recent days about what PM May will say during her 12:30 statement has resulted in fairly fevered anticipation in the UK press this morning. Our central view remains that the UK will eventually see a soft Brexit.   If by the end of this week the UK remains on course for a hard Brexit we would expect fear to have started to eat away at GBP’s resolve.   While our central projection is for EUR/GBP to be positioned in the 0.86-85 area on a 3 to 6 month view, on a hard Brexit will see the potential for a move towards EUR/GBP1.00.”