July 1st, 2020

As the deadline for any extension of the Brexit transition beyond this year expires, UK markets are now braced for at least 3 months of more brinkmanship in Brussels/London talks over a post-Brexit trade and political relationship. The EU insists these talks need to be completed by October to allow ratification and avoid a 'no deal' cliff edge on Dec 31. The pound has been under pressure again in recent weeks, net short positions have climbed and implied volatility is still well in excess of other major currencies. Although sterling and UK are seen as undervalued, that's at least partly due to years of Brexit uncertainty that have yet dissipate. Q3 should be revealing.
Chart by Ritvik Carvalho and commentary by Mike Dolan
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