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Analysts at Rabobank suggest that making assumptions regarding Brexit seems to be difficult as until the disastrous EU summit in Salzburg the market assumed that the UK was making a good progress in negotiating Brexit.

Key Quotes

“This was reflected in GBP/USD rallying to the highest level since the middle of July until EU leaders dropped a bombshell and firmly rejected the Chequers plan. PM May, whose position is being undermined by hard Brexiteers, was reportedly given two weeks by her ministers to make progress convincing EU negotiator Barnier that the Chequers plan is the only viable option for the UK.”

“Another source of political pressure on May is coming from the opposition Labour Party, which intends to vote down any Brexit deal and may call for a second referendum. While Chancellor Merkel offered May a helping hand by warning on Monday other European leaders against taking an excessively harsh stance towards the UK, French President Macron has no such intentions insisting that he wants negotiations to end next month.”

“We assume that a compromise will be reached (even though we may have to wait for that until five minutes to midnight) and a hard Brexit will be avoided.”