The pound continues its recovery path as hopes for a soft Brexit or no Brexit at all prevail. What’s next?
Here is their view, courtesy of eFXdata:
Bank of America Merrill Lynch Research discusses GBP outlook in light of the recent Brexit development.
“In the coming days, the PM will report back to parliament on the next steps in the process, but it is clear from the scale of the defeat that minor tweaks to the Political Declaration will not suffice, particularly as the EU have stated they are unwilling to reopen the EU Withdrawal Agreement.
The government still has options, but in our view, the most likely scenario in the coming weeks is an extension of Article 50. Furthermore, the PM‘s suggestion of a cross-party approach to a solution suggests all paths lead to a soft Brexit, our long stated position…While some have suggested that an extension of A50 merely prolongs the uncertainty hanging over the UK, we would argue that extension of A50 will be a bullish signal for GBP,” BofAML argues.
“Scope for sizeable GBP appreciation once political risk premium priced out. Investors see GBP as significantly undervalued…We maintain our structural GBP bullish call,” BofAML adds.
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