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There have been some reports that the talks are close to collapse. If that proves the case, Brexit uncertainty will resurface meaningfully leaving GBP vulnerable. EUR/GBP, which is trading below the 0.89 mark, could rise towards 0.92 without Brexit breakthrough, according to ANZ Bank. 

Key quotes

“Given the level of uncertainty facing the economy and outlook for the policy mix, we are cautious on the backdrop to sterling in coming months.”

“Anticipated dollar weakness in coming months may help contain downside in GBP/USD, but sterling is vulnerable in the absence of a trade agreement.”

“COVID-19 displaced Brexit as the main source of uncertainty for businesses according to the BoE’s decision makers panel. But it would be no surprise to see its relevance climb again as the effects of the pandemic gradually recede should no progress be made in the trade talks in coming weeks. A no-deal Brexit would leave sterling vulnerable to a re-emergence of Brexit anxiety.” 

“Our current forecasts look for EUR/GBP to move towards 0.92 in coming months with GBP/AUD declining towards 1.75. Our forecast of negative rates in New Zealand, however, will weigh on the NZD.” 

“Pragmatism suggests that some form of trade deal is in both sides’ interests, but politicians are not prepared to agree a deal at any cost. Without progress in the talks, the prospect of a no-deal outcome could cause significant volatility in GBP.”

 

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