MUFG Research discusses GBP outlook and adopts a tactical bearish bias.
"Yesterday the pound was the worst performing G10 currency. The pound briefly tested the 1.2200 floor against the US dollar, the lowest since early September, on news that the prospect of a Brexit deal being reached at the EU summit next week had severely diminished," MUFG notes.
"In the interim there is little reason to expect a deal by next week’s summit and similarly by the deadline at the end of the month. Although it appears that the Benn Act, which requires the government to seek an extension to Article 50 if there is no deal reached at the EU summit, appears watertight and unlikely to be circumvented by government there will likely remain some (however minor) concerns that a No Deal Brexit could still happen by the end of the month.
This coupled with the fact that at best No Deal Brexit risks have only been pushed out rather than diminished will weigh on the pound during the remainder of the month," MUFG adds.