Morgan Stanley have shorted EURGBP
The folks at Morgan Stanley entered a short EURGBP trade at the Thursday NY close (around 0.8433 by my reckoning) for a target of 0.7900 and a stop of 0.8600.
"We think that a good way to express EUR weakness after the ECB meeting is to sell EUR/GBP. GBP has been helped by the UK government showing increasing sensitivities to avoid a 'cliff edge'. Yesterday, PM May agreed to publish her negotiation plans and promised that MPs could vote on the final exit deal. A hard or closed Brexit will be more difficult to achieve under these conditions, suggesting GBP reducing some of its Brexit risk premium.
Other ways the Brexit premium could be reduced are via the UK Supreme Court asking the ECJ to decide whether Article 50 is 'irrevocable' or by Britain finding its negotiation enhanced by a possible interpretation of Article 127, suggesting that leaving the EU would not automatically cut the UK out of the single market. On the other side the ECB has made it clear that they intend to keep monetary accommodation in the market, especially if market volatility increases. The ECB buying bonds below the depo rate should keep front end rates low, pushing the EUR lower. The risk to this view is an increased market probability of a "hard Brexit".
0.7900 is a reasonable target for this one. One problem the trade faces is if the UK sees inflation really picking up in 2017 as that might cause a bit of a fight between Brexit bears, and BOE rate traders. Their first big hurdle is getting bellow the 0.8335/00 area which has been still support since the Brexit vote.
EURGBP daily chart
I think there's some room for EURGBP shorts over the early part of 2017 but we'll need to keep a good watch of the inflation numbers from both sides.