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Cable crossroads

14/09/2018

Having weathered the various storms of negative sentiment and Governmental incompetence surrounding the UK’s departure from the EU, Sterling is looking surprisingly well supported. The recent low at 1.2660 was a month ago, and while it hasn’t all been plain sailing, the trend is starting to look bullish to us. Mark Carney has had his contract extended at the Bank of England, (despite really only being popular with Chancellor of the Exchequer, Philip Hammond), but to investors continuity counts for a lot. Discussions with the EU are coming to a head and the UK is only a couple of weeks away from having just 6 months to tie up a deal. We suspect a deal is more likely than not, because for all the tough talk from Barnier & Juncker it won’t be France & Luxembourg that suffers from the No-Deal scenario, it’ll be Germany, a fact they’ll be obliged to keep foremost in their minds. Whatever agreement comes, the removal of uncertainty will benefit Sterling, which is starting to look very under-valued when all is taken into consideration.

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