MUFG Research discusses GBP outlook in light of the latest Brexit developments.
"The pound fell most notably yesterday and the strong showing by the Brexit Party has fuelled speculation of a shift toward a Hard Brexit departure from the EU on 31st October. While that risk is certainly set to grow in our opinion, the EU election results in the UK in fact underlined a consistent fact about Brexit – the UK electorate remains as divided as ever with Leave and Remain sides not budging much," MUFG notes.
"So we believe one consequence of this election result is the confirmation that the Labour Party can draw on evidence of strong support for a 2nd referendum. The Labour Party along with the Conservative Party suffered a large loss of support – Labour’s vote share fell from 25.4% to 14.1% - and Jeremy Corbyn must now see that his policy of sitting on the fence on Brexit simply isn’t working.
So we don’t see the surge in Brexit Party support as the key takeaway from the UK election result and the prospect of a 2nd referendum is increasing – a fact that will help limit GBP selling as political uncertainty increases once again," MUFG adds.