The firm argues that an early election call could lead to the pound outlook deteriorating further today
The firm's head of G-10 currency strategy, Valentin Marinov, notes that:
"All eyes are on the UK parliament today as MPs return from the summer recess. The UK opposition parties are expected to table a motion to force a Brexit delay if the government fails to reach a deal. If the motion is successful, however, it may also trigger new elections in the UK."
Adding that they see this potentially heralding a new beginning of a downtrend towards 1.15 or lower in cable. However, they do note that a lot of negatives are already factored into the price of the pound and that any breakout below 1.20 may not be sustained as such.
In my view, fear and uncertainty isn't something that can be typically quantified so the 1.20 level may appear significant now but it isn't necessarily a key psychological level when markets are behaving this way.
I'd be more wary about any break below the October 2016 low across sterling pairs instead.
