GBP prone to further volatility and weakness - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the persistent uncertainty regarding the Brexit leaves GBP prone to further volatility and weakness.

Key Quotes

“Coercion of the government to be more open about the Brexit process is unlikely to provide clarity over negotiations, at least not in advance of November’s Autumn Statement. Legal action against Brexit or a push for parliamentary vote may sway sentiment to some extent, but the likelihood of actually altering policy is slim at present.

GBP’s “flash crash” certainly indicated the vulnerable side for GBP. The steady decline that has followed the “flash crash” rebound underlines UK’s loose monetary policy, expanding of fiscal policy, wide trade deficits and uncertain investment intentions.

Levels close to 1.20 make sense, despite the risk of a positional squeeze now that CFTC reports show new extreme shorts.”