Commentary on sterling via Scoita, leading off with a very fair observation indeed:
- The outlook for GBP remains fluid, with the precise trade framework which will govern the UK’s trade relationship with the EU after Brexit at the end of the month still to be determined.
Yep.
Further (bolding mine):
- It remains unclear whether a trade deal can be reached, however.
- No deal will be negative for the GBP—and the EUR, to an extent—while a last-minute agreement will leave both sides of The Channel under-prepared for the new regime.
- We expect any early year EUR softness to remain relatively contained. And we also feel that a lot of bad news is already factored into the GBP, tilting medium-term risks towards the topside and suggesting shorter-term weakness may be limited to the 1.25/1.27 area.
‘Limited’ to 1.25 (even 1.27) …. I’ll take that!
A separate analysis from the bank:
- Brexit negotiations … a fully-fledged trade compact with Europe and a settlement on the status of Northern Ireland are likely to remain pending agenda items into 2021 even if initial deals are concluded before the holidays.
- dim view of the UK’s prospects is compounded by Westminster’s uneven response to the COVID-19 pandemic
- “We believe the GBP is gearing up for a sharp decline toward or below the 1.30 mark upon a final announcement that trade discussions have concluded without a deal; upside remains limited (1.36) given the still-low odds of a deal.”
