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The British currency could fall to $1.15 or even to $1.10 against the US dollar, if the United Kingdom leaves the European Union on October 31 without an agreement.
"If Great Britain manages to extend the delay in quitting the European Union before the deadline is set, then a slight positive reaction can be observed in the dynamics of the pound. In this case, the GBP/USD pair will consolidate in the range of 1.20–1.25," the analyst said.
"If the UK achieves a deferment and forms a non-socialist government, sterling could go up to $1.30," he added.
It should be noted that the last time for 1 pound was given less than 1 dollar and 15 cents in the distant 1985.
Nearly no one believes that an agreement on the Brexit conditions between the EU and UK can be concluded until October 31.
Recall, the day before, German Chancellor Angela Merkel said that Northern Ireland should remain part of the EU customs union. The Prime Minister of the United Kingdom, Boris Johnson, said in response that this condition, along with the EU's reluctance to meet its latest deal proposals, is paving the way for a no-deal Brexit. At the same time, EU representatives made it clear that they were ready to discuss the postponement of Great Britain's withdrawal from the EU.
"We think that the UK will nevertheless ask for another Brexit postponement and hold early elections in late November – early December," analysts at ING said.
"This delay can be granted for a period of more than three months, and this time should be enough for the new British government to find a common language with the EU," they believe.
"If parliamentary elections in the United Kingdom take place earlier, then the British currency will be under pressure. In this case, Conservatives can get a majority in Parliament, which will increase the likelihood of a hard Brexit and increase the risk premium for owning the pound. In this scenario, GBP/USD should fall below 1.20, as well as a retest of EUR/GBP at 0.93. Strengthening the risks of a disordered UK exit from the EU will limit the growth potential of EUR/USD and adversely affect the segment of European currencies as a whole," said ING.
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