MUFG Research maintains a bearish bias on GBP in the near-term.
"The pound continues to weaken this week as market participants move quickly to price in more of a Brexit risk premium. After largely ignoring the lack of progress in Brexit talks in recent months, the pound has weakened sharply in recent days resulting. The trade-weighted pound has fallen by just over 2.0% from its recent peak. It still leaves plenty of room for further weakness if the risk of a No Deal Brexit continues to rise considering that there was little risk premium priced into the pound before the recent sell off," MUFG notes.
"The EU and UK are set to hold an emergency meeting today. At the very least the UK government’s internal market bill, which it admits would break international law in a “specific and limited way”, undermines trust between both sides and makes it even harder to reach a last minute compromise trade deal. Risks to the pound remain heavily skewed to the downside in the near-term," MUFG adds.