According to economists at Westpac, a Brexit deal appears to be imminent with only seven days remaining in the transition period. The GBP/USD pair is set to escalate towards the 1.37-1.40 range if a deal is finally reached while EUR/GBP is expected to slump below 0.90 towards 0.88.
Key quotes
“This time it really does appear that a deal will be struck just in time for Christmas. Both European and UK Parliamentarians are reportedly on standby to sit between Christmas and New Year in order to fast track the deal into law in the UK and provisional law, to be then ratified by individual nations, by EU Parliament. 24th December, therefore, does look like it will be the day that a deal is finalised and detailed.”
“If a deal does transpire on 24th December, GBP is likely to make further gains. GBP/USD is likely to push into a 1.37-1.40 range but potential for a more substantial move towards 1.4500 now seems unlikely given how positions exhaustion is so prevalent. Similarly, EUR/GBP is likely to slide below 0.9000 towards 0.8800 but scope for a shift to 0.8500 also seems unlikely.”
“Risks remain though. Contentious issues from either side could still derail negotiations. Also, once approved by UK Parliament and EU Parliament, the EU-27 nations need to ratify this and it could throw up surprise opposition to the deal and so create uncertainty about its sustainability and full implementation. However, those risks now seem to be relatively minor given the concentration upon the severe economic implications of the current pandemic and its new variants. This should greatly reduce the potential of unsettling opposition.”
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