MUFG Research discusses GBP outlook and flags further declines ahead of some key technical levels at risk.
"We are now assuming the May Brexit deal agreed with the EU will not pass parliament on 11th December. The reference by Sir Michael Fallon that the UK-EU deal is “doomed” and needs to be renegotiated is not a good sign. A pragmatist and previously a loyalist, his assessment certainly points to failure of this deal. That then opens a Pandora’s Box of scenarios!...
There are lots of ifs and buts to these scenarios but the conclusion is clear – this deal being voted down on 11th December is a disaster in terms of the uncertainty it will create through the turn of the year into Q1 2019," MUFG argues.
"There are some key technical support levels for GBP/USD that are now close – 1.2699; 1.2696; and 1.2662; all previous lows in October and August – and a breach of these levels will open up a move back into a 1.2000-1.2500 range," MUFG adds.