GBP: Fragile sentiment - Westpac

Richard Franulovich, Research Analyst at Westpac, explains that price action around recent key data points vividly highlights the fragility of sterling sentiment, with GBP hit hard on weaker CPI data and failing to mount an effective bounce on stronger labour market/wages data.

Key Quotes

“The UK govt has detailed plans for a transitional customs arrangement with the EU after March 2019 to allow more time to settle trade deals. The details are welcomed but also call to attention the daunting challenge ahead and raise more questions than answers, e.g. EU rules prohibit negotiating new deals with external countries during the transitional period and any deal requires EU-wide approval (far from given).”

“GBP offers little appeal even after its recent 3%+ multi day correction lower from its highs amid ongoing background negatives including: 1) persistent Brexit vulnerabilities; and 2) a central bank that is clearly in no rush to begin normalising monetary policy judging by its recent projection downgrades.”