Danske Bank FX Strategy Research Research comments on GBP direction in the aftermath of the UK elections noticing that what matters for sterling near term is the strength of the government that goes to Brussels to negotiate Brexit terms on behalf of the UK – and with any possible governing coalition set to be weak, so will GBP be.
“Notably, speculators covered GBP shorts ahead of the election, suggesting room for speculative GBP selling near term.
What matters for the sterling longer term are the Brexit terms – and the prospect for these have not become more favourable following the present election result as negotiation power has essentially shifted from the UK to the EU. However, if the new government adopts a softer Brexit approach it may be GBP positive later on, but it is obviously very speculative at this point,” Danske argues.
Source: Danske Bank Research
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