Following GBP's meaningful underperformance, a fair degree of risk premia is currently priced into sterling - around 4% according to our short term EUR/GBP financial fair value model (Figure 1). This contrasts with the state of affairs in mid-May when we viewed the market as inadequately pricing in the uncertainty related to the UK-EU trade outlook (see GBP: Market too complacent on transition risk). While the GBP risk premium has risen since then (it's currently worth around 4% vs no risk premium priced in at the time) it still remains below the levels observed in August 2019, during the heightened uncertainty over ... (full story)