UK Q2 GDP will be released tomorrow morning. The British economy is expected to grow 1.7% for the second quarter (annualized). The growth definitely seems to be robust and solid.
Meanwhile, Brexit negotiations are only making slow progress and fears of a Hard Brexit are still present in the markets. In our view, we consider that a Hard Brexit as very unlikely. European Countries have different trade relations with UK and this leads us to think that it will be very complicated that those members agrees on a consensus regarding the negotiations. It seems definitely complicated that the 27 members will all line up against the UK. As a result, this will likely benefit to the UK during this negotiation period.
Since the Brexit vote, the cable has increased from 1.20 to 1.30 and the pair is consolidating slightly above 1.28. There are further room for a weaker GBP in the medium-term as long as markets believe on a likely Hard Brexit or on tough consequences for the UK economy.
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