MUFG notes that the UK appears to be hurtling towards a no-deal Brexit outcome, but also considers that the Pound Sterling downside has been relatively contained despite this potential major negative factor for the UK economy and currency.
The implementation of bilateral contingency plans could limit downside risks if no deal is reached, but the bank still expects sharp Sterling losses if there is no trade agreement.
Contingency plans could contain no-deal threat
On Thursday, with expectations of a trade deal fading, the EU released its contingency plans for no deal being in place.
The proposals would allow the provision of air services between the UK and EU for 6 months, ensure road freight and passenger transport and reciprocal fishing access for 12 months or until an agreement is reached.