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Rabobank analysts think that even if the UK and the EU reach a trade deal by the end of October, any relief rally in the British pound is likely to be limited.

Key quotes

“In his speech at the virtual Tory party conference today, PM Johnson was clearly looking to turn attention away from the series of political U-turns and debacles that have dominated his first year as PM in an attempt to shine a more positive light on his premiership. He spoke about the future, about accelerated change in the country and about his own health. His efforts, however, cannot detract from the fact that he may still be facing a rebellion from his own MPs in the House of Commons or the fact that the Brexit trade negotiations with the EU continue to hang by a thread.”

“In recent sessions optimism in the markets has picked up on hope that a trade deal can still be agreed. That said, at this stage a trade pact will almost certainly lack the comprehensiveness that was being talked about at the start of the Brexit process.”

“As the UK moves into 2021, some sectors will are likely to find themselves losers to the Brexit process while others will continue to operate under the shadow of COVID-19 related restrictions. The backdrop doesn’t bode too well for a PM whose popularity is currently at a very weak position amongst the party faithful. The economic and political headwinds imply that even is a Brexit trade deal is signed by the end of this month, any relief rally in the pound is likely to be half-hearted.”