Tim Riddell, Research Analyst at Westpac, suggests that Brexit and UK’s political uncertainty continue to weigh on GBP.
Key Quotes
“PM May’s post-Brexit plans have heightened divisions within her minority Conservative Govt. Every amendment vote on the plan now carries the risk of failure and a destabilising leadership challenge.”
“So far the plans are scraping through. If passed, discussions over actual exit could resume, notably over the Irish border. That would be seen as providing a softer Brexit, probably with a longer transition period, and would lift GBP. However, Parliament’s summer recess is imminent and so any failure will increase the sense of uncertainty and weigh on GBP.”
“Brexit remains a concern, but recent activity data have been solid and Carney’s seems more confident on the economy. Despite the pull back on lower CPI, potential for an Aug. 25bps rise remains high, though probably stressing BoE’s gradual (dovish) guidance.”
“Unless an actual political crisis develops, GBP/USD’s risk-driven 1.28-1.37 range should hold and allow for interim but limited rebounds, given current USD strength.”
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