MUFG Research discusses GBP outlook and adopts a sidelined bias around current levels.
"Today is the 5th anniversary of the day in which the UK voted to leave the European Union...On a trade-weighted basis, the pound remains 6.7% below the closing level on the day of the vote in 2016 before falling hard the following day on confirmation of the vote result. The initial plunge was 16% through to October 2016, so there has been some clear retracement," MUFG notes.
"There is some good news with reports this morning that the EU and the UK are close to an agreement on the ‘here and now’ issue of the grace periods set to expire next week. While broader more difficult issues will still need to be addressed, avoiding an escalation of a trade conflict next week will be a relief for the market and mean we will avoid the risk of near-term GBP selling on risks of EU trade tariffs being adopted," MUFG adds.