MUFG Research discusses GBP outlook and flags a downside risk form the increased UK-EU tension but maintains a long exposure in GBP/USD for now.
"The pound is the 2nd worst performing G10 currency this week and increased tensions between the EU and the UK is playing a role in this. A meeting yesterday in London to resolve the problems on implementing the Northern Ireland protocol ended without progress, which is raising the prospect of this issue escalating in the coming weeks," MUFG notes.
"We recommended a long GBP/USD trade idea based on the positive macro backdrop to be confirmed in data this week and next. We suspect that will dominate for now but this emerging risk could escalate after the G7 ends," MUFG adds.