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GBP/USD extended Tuesday’s sell-off and neared 1.2900, in the face of no progress between the UK and the EU on a post-Brexit transition trade deal, as they reach the October 15 deadline. All eyes remain on the key Brexit meeting between PM Boris Johnson and European Commission President Ursula von der Leyen on the ongoing negotiations due later today, as per MUFG Bank.

Key quotes

“PM Johnson is scheduled to have a call with Ursula von der Leyen today and at this stage of intense negotiations we would view this as a positive sign.”

“While we understand the political importance of fishing far outweighs the economic importance, we still view this issue as more of a stumbling block that will be resolved. […] This fishing issue is very much politics and not economics. Why politics can fail us the fact that we are at this stage and fishing is one of the key final contentious issues would suggest we are possibly close to a final deal.”

“What is important to emphasise in explaining why we do not believe GBP will get a sustained lift if/when a deal is reached is that there is still likely to be significant disruption at borders even if a deal is done.”

“There is set to be considerable disruption and frictions on trade that may well still be under-estimated by the markets that will likely curtail the period of GBP appreciation following a likely deal over the coming weeks.”