Nordea Research discusses its latest take on Brexit developments ahead of the October-31 deadline.
"The GBP has rallied even though the market still holds an exit by 1st of November as the base case (>50% probability in prediction markets), and most of the rally was fuelled by Merkel's comments in Hague that a solution can be found before 1st of November. But is it sensible to bet on an exit by 1st of November and at the same time price in a more benign exit than a no-deal Brexit? We don’t think so," Nordea notes.
"It seems as if Merkels comments refuelled the optimism around a possible alternative arrangement to the back-stop before 1st of November. We find those comments terribly overinterpreted and give such a scenario roughly the same probability as the odds of Trump buying Greenland before that same date. Zero! After all it has been the (almost) sole discussion point in negotiations in more than a year, and no one (not even BoJo) has been able to present an alternative solution. Either they will leave without a deal (which most likely requires a general election first) or else we get another postponement, with the latter being the most likely scenario," Nordea adds.