Conversation about future relationship with the EU good news for GBP – Credit Suisse

GBP has been among the top performers over the past week. New talks in the UK about its trade relationship with the EU are positive for the British Pound, economists at Credit Suisse report.

UK looking for Swiss inspiration 

“What is new and striking is the internal conversation that appears to have begun in the UK about the future of its relationship with the EU in the aftermath of Brexit, with talk of ‘Swiss style’ arrangements doing the rounds. While unlikely in practice, GBP can derive a rare ray of sun from the existence, finally, of a debate on how to improve the UK trade relationship with the EU.” 

“We have argued that EUR/GBP is likely to remain bound near term in a 0.8600-0.8800 range. While we do not yet call for a breakout, the single most likely path to GBP outperformance in 2023 remains the possibility of a softer line on EU trade relations that allow for a better growth outlook. The bar remains high given the still-hostile attitude of the ERG and the right of the Conservative Party, but this space now finally needs to be watched as a potential source of upside surprises for GBP.”