GBP at risk of Brexit sentiment shift – Westpac

Brexit sentiment has taken a downturn as EU released a politically barbed draft Brexit agreement, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“May’s vulnerable minority gov’t is dependent upon support from pro-Union (with UK, not EU!) DUP. The arrangement EU suggested (should talks falter) for an effective EU membership for N. Ireland, to align with the South and so avoid a hard border, would be unacceptable. Domestic politics have also become more complex since Opposition leader Corbyn mooted an effective customs union, something Brexit factions within May’s Tory Party would not accept. May is to make key statements on Friday and Monday before this month’s EU Brexit summit and a gearing up for the next round of negotiations.”

“Brexit uncertainty undermines confidence for business and consumers. Two major retailers hit the wall this week, reflecting consumer constraints. This combination will weigh on a GBP that has priced in positive Brexit potential and a firmer economy.”

“GBP/USD rejected 1.40 and is now at risk of retracing gains seen since late Q4.”