GBP: Brexit outcome looks binary, but is still cheap - ING

Sandeep Kanihama FXStreet Contributor

According to analysts at ING, EUR/GBP has now declined around 4% from the highs seen in late August, largely due to the chances of a 'no-deal' Brexit becoming slightly less likely.

Key Quotes

“We continue to see the GBP proposition as quite binary, i.e. a virtuous circle of less risk premia and rising UK money market rates combining to deliver a positive outcome for GBP – or the vicious opposite. That said, we still think GBP is highly under-valued against the EUR, and we’re not looking for another 15-20% GBP decline in the event of a no-deal.”

“Currently, the market prices around 50 basis points of Bank of England tightening over the next two years and we think that could shift to pricing 100bp – were the withdrawal bill to be approved by parliament. That would certainly be worth a EUR/GBP move to 0.85 in our opinion – but not too much more.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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