Credit Agricole CIB Research discusses GBP outlook and flags a scope for limited rally on a potential Brexit trade deal as short-term valuation models start to point to expensive GBP levels vs the USD and EUR.
"The GBP remains supported across the board on the back of market hopes that a Brexit trade agreement could be reached early next week. The deal can then be rubber-stamped by the European heads of state at the extraordinary EU summit on 10-11 December and ratified by the EU parliament during its final plenary session for the year in the week of 14 December," CACAIB notes.
"A potential Brexit breakthrough in the trade talks should give the GBP a boost across the board. we further note that the GBP is starting to look expensive vs the EUR and the USD, relative to short-term fundamentals, and that this could limit any potential gains," CACIB adds.