GBP: Downside risks – Nordea

In view of analysts at Nordea Markets, the solid victory at the UK’s general election for the Conservatives and Boris Johnson should, has pave the way for a divorce deal ratification in January.

Key Quotes

“It appears that the markets have not yet fully priced in the expected difficulties concerning the phase two negotiations about the future trade relationship (even despite some sterling weakness this week).”

“We therefore see downside risks in the coming quarters for the sterling – partly due to these phase two negotiations, partly due to continued weakness in the economy (especially in the labour market).”

“Our lukewarm sterling outlook also seems to be more in line with the option market which is clearly positioned for GBP weakness in 2020. We have EUR/GBP at 0.88 on 3-month horizon.”