(30 AUGUST 2018)DAILY MARKET BRIEF 1:GBP surges as Brexit deal optimism spreads

The cable surged on Wednesday as it added 1.53% to $1.3029 after EU negotiator Michel Barnier said the EU would offer the UK a unique deal. The announcement made investors more than happy as it means that the UK would get at least a deal! However, we expect that there won’t be much room for negotiations as the EU will most likely impose its conditions, meaning that the UK will have to take it or leave it.

In our view, the market has been overly optimistic recently and the sharp appreciation of the pound will be short-lived as the EU will never allow the UK to cherry pick conditions. The UK government will have no choice but to comply with the EU’s demands and conditions. Over the last 24 hours, EUR/GBP fell 1.40% as it returned to £0.9878; however, the bias remains on the upside, as investors will soon realize that the pound is overbought and that nothing has changed so far.

By Arnaud Masset