Sterling surged on Brexit optimism

The apparent breakthrough in Brexit negotiations late in the week brought a surge of optimism to currency markets and sent sterling shorts scrambling to cover.

Mixed economic data, namely poor retail sales, and better-than-expected monthly GDP were largely ignored in the wake of this news.

European Union sources tried to cool down expectations over the weekend, but the odds of a no-deal Brexit on 31st October have dropped to around 12% in betting markets. We remain of the view that a postponement and general election will be necessary, but merely ruling out the no-deal option warrants further upside in the Pound, closer to 1.28 on the dollar.

GBP/PLN (07/10/19 - 14/10/19)

Source: Bloomberg Date: 14/10/19

Author: Enrique Diaz-Alvarez, Chief Risk Officer at Ebury

Keywords Ebury, GBP