UK: Rising political uncertainty - Nomura
Analysts at Nomura point out that UK’s political uncertainty is again rising and their main scenario remains that the UK and EU reach an agreement on the transition deal, but in the near term UK politics will remain a GBP driver.
“GBP’s reaction to UK politics and our Brexit stress tracker are rising again. The estimated sensitivity is still more muted than a year ago, but now GBP’s negative reaction is more concentrated against the traditional safe-haven currencies, CHF and JPY. If UK political uncertainty keeps rising, CHF and JPY will likely face appreciation pressures into the important EU summit on 14-15 December. If an agreement is reached then, we would expect a small relief rally in GBP/CHF and GBP/JPY.”