Euro/pound topped 0.90 amid the sell-off of the pound. What’s next?
Here is their view, courtesy of eFXdata:
MUFG Research discusses GBP outlook amid the latest Brexit development and advises caution in the near-term.
“The pound sell-off could accelerate further heading into yearend if EUR/GBP breaks above key resistance at the 0.9100-level where the highs from August are located. There is then there little in the way of resistance for EUR/GBP until the highs from August 2017 at around the 0.9300-level.
The clear trigger for the sharp pound sell-off was PM May’s decision to postpone the vote planned for today on her Brexit deal. It was an acknowledgment that her deal was heading for a heavy defeat. In an act of self-preservation, she decided it was better to pull the vote than suffer a landslide defeat which would have increased the likelihood of an immediate leadership challenge. Interestingly, the pound reacted as if PM May had suffered a heavy defeat anyway,†MUFG notes.
“The Brexit timeline is now less clear…We are now in highly uncertain stage of Brexit negotiations,†MUFG adds.
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