GBP: Downside risk in Q3 - ING

According to analysts at ING, EUR/GBP is likely to test the 0.88 level in the third quarter in response to the negative headline news stemming from a possible Conservative leadership battle and concerns about a eurosceptic prime minister.

Key Quotes

“Here, the partial clean-up of GBP short positioning (and some built-up of new speculative longs) can also add to the reversal as GBP positioning is no longer meaningfully skewed one way.”

“However, as Parliament is likely to try to avert 'no deal', perhaps easing some of the initial fears about a new eurosceptic leader, we expect GBP to recover some of its loses in Q4.”

“The fourth quarter is likely to be accompanied by another extension to the Article 50 period (beyond October), or less likely, a decision by the UK Parliament to revoke Article 50 altogether. This means that EUR/GBP should not move below the 0.8500 level persistently this year.”