Pound seen falling 5% if UK trade talks with EU go nowhere

The pound, a barometer for markets through four years of Brexit twists and turns, will probably weaken by 5% if the U.K. and European Union fail to reach a trade agreement.

The currency may fall to $1.25 by the middle of next year, according to a Bloomberg survey of nine strategists, as the disruption exacerbates economic damage from the pandemic. Sterling was little changed at $1.3191 as of 4:38pm on Monday in London.

“The prospect of a no-deal exit still involves a substantial decline in sterling’s value, as the fragile UK economy experiences another downside shock that can’t be met with wide-sweeping fiscal stimulus measures, and is likely to involve negative rates from the Bank of England,” said Simon Harvey,…