GBP: hoping for a 'gentlemen's agreement' over a Brexit transition - ING
Analysts at ING explained that while a rally in GBP/USD was our conviction call last week, admittedly it was more of a bearish USD story - as opposed to an isolated bullish GBP move.
"The pair has moved up to the 1.33 level but has failed to push on - likely due to the lack of appetite amongst investor to take a clear directional view ahead of the key Brexit-focused Dec EU summit. The next couple of weeks will see a lot of noise in the build-up to this - noise that we think could be ultimately positive for GBP, especially if it continues to ascribe a 'good chance' to there being progress made in Brexit talks. Reports of PM May being ready to pay a £40bn Brexit Bill is constructive - though we think GBP's price action will be more contingent on the prospects of whether we get a 'gentlemen's agreement' over a transition deal."
"The UK calendar is light - watch out for the BoE's Financial Stability Report (Tue), UK confidence data (Thu) and manufacturing PMI (Fri). Latest foreign investor holdings of UK gilts data in the BoE monetary stats (Tue) will be quite interesting as well - especially to see whether short-term domestic political risks have dampened UK asset sentiment. We think the bar is fairly high for domestic politics to actively weigh on GBP - the real focus will be on factors that could meaningfully delay Brexit talks."