UK: All quiet on the Brexit front but GBP political risks to return in the fall - ING

From a former Chancellor speaking about monetary policy to a former Governor of the Bank of England talking Brexit negotiation strategies (yes, that is the right way round…), there's been plenty in the weekend press to fill the summer void of market events, explains Viraj Patel, Research Analyst at ING.

Key Quotes

“But while headline-driven GBP moves have recently subsided, we note that the currency is far from out of the woods when it comes to political event risks. We earmark October as the next key month for GBP markets; both the Tory Party Conference (1-4 Oct) and the final round of opening Brexit talks (Oct 9) will shed light on the stability of the UK political environment, as well as any progress being made when it comes to the UK's 'smooth' exit from the EU. Equally, we’re likely to know by early Oct whether the BoE has any appetite for a Nov rate hike; we still see the 30-35% probability priced into markets as a GBP headwind. At this stage, GBP vols look fairly low relative to the risks ahead and with two-way risks to the currency, vol-based strategies may be the way forward.”