GBP pushing higher again - odds of no-deal slipping again

Published date: 09/09/2019

The pendulum of sentiment over Brexit is slipping again, with the opposition to a no-deal really showing its hand last week and forcing a serious rethink from PM Johnson and his pro-Brexit colleagues within the government.  Over the weekend, we had reports in the press that he has briefed his cabinet over a possible delay to the Brexit deadline at the end of last month, though this is far from certain as parts of Europe - notably France - have suggested that they may vote against offering the UK yet another delay in their exit date from the EU.  

Reports from Ireland this morning also suggest that a deal done by the end of next month is also the preferable option, but this means a climb down from one or other side over the red lines which have brought us to this point.  So it now seems that the EU is playing the same game as PM Johnson in trying to force the other side to accept the terms on the table, but there are plenty of twists and turns left which could yet see the negotiating process break down once again.  

Even so, the odds for reaching a deal have been raised once again by some banks, and this is reflected in the latest round of GBP buying which has seen Cable retest the highs from last week, tipping the highs seen on Thursday last week and reversing the 'down day' seen on Friday.  

Key levels are also in focus in EUR/GBP, where we see the 0.8920-30 area likely to draw in some initial demand with 0.8890-00 representing the lows seen in late July from which we pushed up to briefly take out the 0.9300 level.   

We also note decent GBP/JPY buying in the process, with this having helped USD/JPY recover above the 107.00 mark once again - GBP/JPY has been a popular route to express GBP weakness as well as the impact in risk if the UK does indeed leave the EU without a deal.  We have taken out the 132.00 level this morning with a little more clarity, with this now a 5 + JPY turnaround from the lows seen last week as well as in early August.


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