TD Research discusses GBP outlook in case of a no deal outcome between the EU and the UK.
"We think the shock value of failing to reach a deal by the end of the year will see GBP weaken — and probably sharply at that. Here, we think a sudden and largely-unexpected No Deal outcome could be worth as much as a 5-7% drop in cable in the days immediately after the event. That is, we equate a No Deal outcome more along the lines of the October 2016 "flash crash", with a high/low range of -6.2% than the June 2016 referendum itself (-11.9%)," TD notes.
"From current levels, for example, that would imply a spike down to the 1.20-1.23 zone. Interestingly, this is the neighborhood where we have seen cable bounce repeatedly since the referendum," TD adds.