MUFG Research discusses GBP outlook in light of the latest Brexit developments.
"The pound remains close to recent highs after cable hit an intra-day high of 1.2523 overnight and EUR/GBP fell to an intra-day low of 0.8856. The pound has now run into stronger technical resistance levels between 1.2500 to 1.2600 for cable where the July highs are located, and support at just below 0.8550 for EUR/GBP from the 200-day moving average. It should make further near-term gains more challenging for the pound after its recent sharp rebound," MUFG notes.
"The pound continues to derive support from building optimism over the prospect of a last minute Brexit deal stemming from reports that the UK government is working on a type of Northern Ireland-only backstop to ease concerns over a hard border in Ireland ...However, we still believe there are major hurdles to a last minute deal...Evidence of progress on both fronts will be required for the pound to build on recent gains. If it proves elusive, the pound could quickly start to reverse course," MUFG adds.