British Pound in for sharp losses if UK-EU trade talks breaks down

United Kingdom and European Union

The British Pound may likely fall sharply if United Kingdom and the European Union trade deal talks breakdown, given the market's sentiment that both regions will reach agreement before the Brexit transition period ends on December 31, 2020; Commerzbank says.

"Looking at the current GBP exchange rates, I cannot imagine that a no-deal Brexit has really already been priced in," Commerzbank's Antje Praefcke says.

Praefcke remains "optimistic" about an agreement as it would be "almost grossly negligent" to risk a no-deal Brexit when U.K. companies are already struggling due to coronavirus.

However, there is still the possibility that the "worst might happen" and that sterling will suffer from "heavy losses as a result," she added.

The GBP/USD and EUR/GBP are both flat at 1.2737 and 0.9108 respectively at time of reporting this.

A roundup of analysis from Dow Jones Newswires after European Union leaders agreed a €750 billion economic rescue package. https://t.co/5446Pe8Yuh

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Credit: Dow Jones Newswires