“The ebb and flow of Brexit continue to drive GBP and UK rates,” note ING analysts.
Key quotes
“After a bad October, (GBP short-term rates priced three years forward fell 30bp during the first three weeks of October), we see something of a reprieve. Remarks that we’ll see a Brexit deal by November 21st have helped, although the UK press story that an equivalence deal for financial services has been agreed looks over-hyped.”
“Cable has now swung into the upper half of the 1.27-1.32 trading range, and frankly, there is not much certainty we can push a lot higher. That said, further remarks from Brussels that they may be compromising their position on the need for a back-stop on the Irish border could trigger some modest GBP gains.”
“The UK data focus next week will be Thursday’s 3Q18 GDP release. Consensus already expects a strong 0.6% QoQ and UK rates have already risen after the central bank press conference. Unless we see a 0.7% QoQ print or higher, it will be difficult to see GBP/$ push onto the 1.3250/3300 area. However, we are becoming more bearish on the EUR, and for those expecting sterling to perform a little better, we could see EUR/GBP trading down to 0.8620.”
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