GBP: Uncertainty discount is expected to recede – ANZ

Brian Martin, Senior International Economist at ANZ, suggests that they do not forecast that sterling will recover all of its decline as considerable political uncertainty will remain, but a deal would reduce current economic uncertainty and allow GBP to rise 5–7% in coming months.

Key Quotes

“Since the Brexit referendum, the correlation between the twin budget and the UK’s effective exchange rate has weakened dramatically to -0.06.”

“If an agreement is reached, a considerable proportion of sterling’s discount can unwind.”