GBP: Getting to a ‘neutral’ level and then trading the Brexit facts - ING

In view of the analysts at ING, despite the various ‘hard’ Brexit curve balls thrown recently, GBP has shown the defensive resilience of an English opening batsman; undoubtedly there has been the odd shaky moment, but for now GBP has managed to safely see out the fiery opening exchanges between UK and EU officials.

Key Quotes

“We rationalise this as markets wanting to move towards a neutral Brexit level and a powerful positioning unwind currently taking place. There’s no doubt that investors have become disillusioned with the post-Brexit doomsday scenarios that were initially painted given the lack of evidence in the current UK macro data supporting these calls. But this shift in perceptions has also made it difficult for investors to hold onto any bearish GBP positions over a sustained period of time.”

“While the Brexit end-game remains a ‘black hole’ at this stage – and one where a negative UK economic outcome is still plausible – markets are now more inclined to trade the Brexit facts, rather than the bearish analyst ‘rumours’. GBP/USD consolidation around the 1.30-1.31 area would in our view be illustrative of a ‘neutral’ Brexit level.”