MUFG Research discusses GBP outlook in light of the latest Brexit developments.
"The pound continues to remain under heavy selling pressure in response to building political uncertainty in the UK. EUR/GBP is on course to extend its record run to fourteen consecutive days of gains. It is now clear that Theresa May’s time as Tory leader is up. Her last ditch attempt to pass her Brexit deal has failed," MUFG notes.
"It is inevitable now that PM May will be replaced soon and should come as no surprise. The market’s attention is already switching to what happens after PM May is replaced as leader. Leadership candidates are already positioning themselves ahead of the contest as evident by Andrea Leadsom’s decision to resign from the cabinet yesterday. The process to elect a new Tory leader is expected to be completed in the coming months. The high likelihood of new Brexiteer PM is understandably heightening fears that it will put the UK on a more confrontational course with the EU which increases the risk of a “No Deal” Brexit at the end of October. We continue to see further downside potential for the pound even after the recent sharp selloff," MUFG adds.