This quick note on sterling via ING pretty much sums it up ...

GBP: Neither here nor there

The 6 month extension of Article 50 modestly weighed on GBP given that

  • (a) the cliff edge of hard Brexit is still in sight and not being postponed long enough;
  • (b) the not long enough extension is unlikely to allow the BoE to hike interest rates, meaning that GBP will miss on one potential positive catalyst.

In the meantime, the extension is unlikely to improve business confidence much, thus limiting the upside to GBP. With the bar for the Brexit deal being passed through the UK Parliament by the October deadline still rather high and the rising probability of a change in Conservative leadership ahead of the October deadline (ie Conservative Party Conference in Sep), this suggests a difficulty for EUR/GBP to move below the 0.8500 level