MUFG Research discusses GBP outlook and maintains the view of buying dips as a medium-term trade into year end but flags some caution in the near-term.
"Despite the general positive momentum, some caution may be necessary, and the pound may have ridden out its short term headline driven rally to 1.3000.
Last week was a bumper week for the pound, as positive Brexit developments materialised and a cautiously optimistic and increasingly hawkish BoE signalled a faster rate hiking pace in the event of a smooth Brexit. It gave the markets a taste for what may happen for the pound going forward if a “No Deal” outcome is avoided. That said, there may still be further twists and turns before a Brexit deal is finalised and legislated for in the coming months.
Overall, we continue to believe that the pound is a buy on dips based on an assumption that a “No Deal” outcome will be avoided," MUFG argues.