Pound Domination Against Dollar to Continue Despite Rising No-Deal Brexit Risk

The pound continued to flirt with five-month highs against the dollar, and is likely to add to gains despite rising worries the U.K. and EU are unlikely to end the stalemate on post-Brexit talks, which are set to be resumed next week.  

GBP/USD rose 0.15% to $1.3051.

The U.K.'s chief Brexit negotiator David Frost said the U.K. would work to iron out key sticking points on a range of measures including regulatory standards, fisheries, and security policy as the next round of talks kick off on Aug. 18.

Frost, however, said the U.K.  would not comprise on its sovereignty, over its laws, courts, or fishing waters, suggesting that efforts to end the current stalemate will be fraught with difficulty.

Ahead of the talks Ireland's Prime Minister Micheál Martin said a "landing zone" for the deal had emerged.

But analysts appear to be downplaying the prospect of any deal making at the upcoming round of talks, raising the economically damaging prospect of the U.K. adopting World Trade Organization terms to trade with the EU.

“As the trade talks have made no progress so far, it seems increasingly unlikely that an agreement will be reached by the end of the year,” Commerzbank (DE:CBKG) said. “Without such an agreement, trade would then be conducted according to WTO rules from next year onwards, which would be a bitter blow for both sides in real economic terms, but above all for the British economy, for which the EU is by far the largest trading partner.”

Still, the prospect of a no-deal Brexit is unlikely to see the pound cede much ground to the dollar, as the greenback is forecast to continue its slide.

Commerzbank forecasts GBP/USD to reach $1.32 by the end of the year, and hit a high of $1.39 next year.