A note on UK politics and GBP via ING. On politics first, Monday's vote for an early election:
- a UK general election unlikely to gain the required majority
- the eventual agenda may move back towards the Withdrawal Agreement Bill, with the aim of translating the deal into law. Still, there is a risk that Boris Johnson will follow on his threat and, unless the early election vote is passed, he does not follow with legislating the Withdrawal Agreement Bill, effectively ending up with a zombie Parliament.
And, for GBP:
- All this means vanishing catalysts for any GBP upside
- short term financial fair value model suggests that GBP is currently around 1.5% over-valued vs EUR
- pointing to some scope for a reversal in GBP gains given the vanishing positive catalysts for the currency
- GBP/USD 1.2716 is the next level to watch
