Societe Generale Research discusses GBP outlook in light of the latest development with regarding to the UK leadership challenge.
"UK Conservative rebels have fallen short of garnering the signatures need to mount a leadership contest. If getting 48 signatures is this hard, the chances of ousting the Prime Minister are even harder. But at the same time, the DUP is flexing its muscles, and whether the current deal can get through the House of Commons remains doubtful. ‘A deal' is still more likely than no deal, but there are plenty of twists and turns left
For the pound, it all adds up to a range-bound EUR/GBP despite the elevated vol and stretched risk reversals. GBP/USD is supported by EUR/USD and by the dip in US bond yields, which may yet squeeze some more sterling bears out of their positions," SocGen argues.