Credit Agricole CIB Research discusses GBP outlook, and maintains a bearish bias expressing that via holding a short GBP/USD from 1.27 targeting a move towards 1.20.
"The UK and the EU agreed yesterday to step up their efforts to reach a trade deal before the end of the year. In particular, the two sides committed to extra meetings in coming month. We doubt that this will be enough to bring the two sides closer to a deal, however, and suspect that the negotiations could drag on at least until Q420. Indeed, in our view the October EU summit may have become the hard deadline to avoid a no trade deal Brexit. This means no end to Brexit uncertainty and the threat from ‘a no trade deal Brexit’ for the UK businesses and households and thus no end to the gloomy outlook for domestic spending and investment," CACIB notes.
"We think that there is a nonnegligible chance that the MPC would signal a more aggressive expansion of its balance sheet and/or consider open-end asset purchase as well as further rate cuts. This much should continue to make the GBP a sell on rallies," CACIB adds.