GBP/USD off Lows, but Some See Risk Ahead as Brexit Talks Set to Resume

© Reuters.  © Reuters.

By Yasin Ebrahim – moved off one-months lows on Thursday, but remained under pressure as focus shifted to the risk of the U.K. leaving the EU without a deal as both parties are set to renew talks next week.

GBP/USD fell 0.52% to $ 1.2449, but had been as low as 1.2408 intraday.

Brexit will again be a key driver for sterling, Rabobank said. It warned of a potential slide in sterling below $ 1.20 in the next three months amid the economic uncertainty around whether the U.K. and EU will be able to agree on a post-Brexit deal on their future relationship.

A day earlier, the U.K and EU agreed dates for the next three rounds of negotiations, with talks set to take place by video conference in the weeks beginning April 20, May 11 and June 1. 

Others have also echoed the bearish sentiment on sterling.

Commerzbank (DE:) said it sees ending the year at 89 pence per euro, as the U.K. has not indicated it is willing to extend the deadline for trade talks.

Without a deal, Britain risks leaving the EU without a trade deal, which many believe will heap further pressure on the economy at a time when growth is expected to come under heavy pressure due to the impact from the Covid-19 pandemic.

“While my base case is that Brussels and London will come to some kind of agreement at the last minute, I do think that there will be a phase of uncertainty with higher sterling volatility before that happens,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank, according to Bloomberg. “It is far from clear whether the British government really will be willing to extend negotiations due to the current crisis.”

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