According to Westpac economists, a Brexit deal seems imminent as there are only seven days left in the transition period. The GBP / USD pair is expected to escalate towards 1.37-1.40 when a deal is finally struck, while EUR / GBP is expected to drop below 0.90 towards 0.88.
“This time it really seems like a deal is being made just in time for Christmas. Both European and UK MPs are reportedly on standby between Christmas and New Years to speed up UK law and provisional law, which will then be ratified by individual nations in the EU Parliament. December 24th, therefore, seems to be the day a deal is closed and detailed. “
“If a deal is made on December 24th, the GBP will likely make further gains. GBP / USD is likely to push in the 1.37-1.40 range, but the potential for a more substantial move towards 1.4500 appears unlikely given the widespread exposure to positions. Similarly, EUR / GBP is likely to fall below 0.9000 towards 0.8800, but the possibility of a move to 0.8500 also seems unlikely. “
“The risks remain, however. Controversial issues from both sides could still cause negotiations to fail. As soon as the EU-27 has been approved by the British Parliament and the EU Parliament, they have to ratify it. This could lead to surprising opposition to the agreement, creating uncertainty about its sustainability and full implementation. However, given the focus on the severe economic impact of the current pandemic and its new variants, these risks appear to be relatively minor. This should significantly reduce the potential for worrying opposition. “