Citi on what's next for the pound
Analysts at Citi Research note that that the pound continues to be driven almost entirely by political headlines but some good news may already be priced in.
"To us, extension of Article 50 remains the highest probability outcome but we are reluctant to chase the relief rally further, particularly as FX may have overshot what rates markets imply," they write.
The problem is that the risk-reward isn't balanced. A 'no deal' scenario implies a sharp drop while an extension would lead to a smaller bounce.
Another risk is an election.
"If a Corbyn-led Government looks likely, one could also expect a new low in GBP," they write. "Business 'unfriendly', deficit financed policies could lead to capital outflows from the UK and given the UK's relatively bulky CA deficit, GBP would look vulnerable."
