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The pound was hit by weak inflation that joined political uncertainty and other issues. What’s next?

Here is their view, courtesy of eFXdata:

MUFG Research discusses GBP outlook and notes that  the negative impact of heightened UK political uncertainty on the performance of the pound is becoming more evident, which along with today’s soft UK CPI print  could prompt rate hike expectations to be pushed back significantly.  

“The latest developments clearly highlight the government’s fragile grip on power and lack of flexibility in Brexit negotiations.

Understandably market participants are building in a higher risk premium into the pound to reflect heightened uncertainty, and the risk premium may need to rise further heading into the year ahead. The one reassuring development for the pound is that the numbers in parliament should still favor a softer Brexit when it comes to the crunch even if the votes this week do not back up our view,” MUFG adds.

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