NatWest comments (these in summary) on GBP and the vote on 15 January 2019

  • The main conclusion is that uncertainty is likely to persist for longer
  • Avoiding no deal should be unambiguously positive GBP … in the near term. The medium-term route map is far less clear-cut
  • A 'Remain' outcome would be a necessary, but not sufficient, condition to unlock Sterling gains - the perceived 'permanence' of such an outcome would be crucial.
  • 'Can kicking' would potentially leave risk premium elevated.
  • A referendum backing remain would confer legitimacy; by contrast, a General Election (though unlikely) would cause additional weakness and volatility.
  • We stay long GBP Trade Weighted Index (TWI) through long GBP/CAD and short EUR/GBP