ANZ on brexit: Insufficient progress the most the most likely scenario (and here’s the trade)

ANZ on «brexit» — recommending the sale GBP, more specifically GBP/CNHThe ANZ note is detailed, but their reasoning in short:
The European Parliament’s resolution indicates that it has not been «sufficient progress» in the «brexit» talk

  • this will feed into the EU official at the summit of a vote later in the month (19-20 October)
  • we see little chance that the leaders of the EU will be in contradiction with the resolution of the Parliament
  • Without a judgment of «sufficient progress» of the european UNION, the negotiators will not be allowed to start negotiations on a transitional period or the future trade relations
  • the negotiations around a transitional period and a trade agreement that is likely to be postponed to December, at best,

On sterling:

  • As the market digests the continuing increase in uncertainty, we see the potential short-term weakness of the pound sterling, and we recommend that you of the tactics of the sell against the CNH.
  • The chinese authorities indicate that they do not want the yuan to weaken too much from current levels, meaning the CNH is likely to trade in a consistent manner. In addition, from a technical point of view, the cross seems to have overcome near the resistance level (just below 9), and is due to some tactics of retracement
  • We recommend selling the cross with a target of 8.66, and we will re-evaluate the trade at 9.00.

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