With only one hundred and seventy-nine days to go before 'Brexit Day', the hourglass is slowly running down. There are now only a few opportunities for a deal to be reached between the EU and the United Kingdom, with recent attempts revealing both parties are at an impasse.

The next, and possibly final, opportunity for a Brexit deal lies at the October 18th EU Summit, where leaders will review the state of the negotiations with the UK. President Donald Tusk recently stated, while addressing delegates at the Salzburg summit, that "In October we expect maximum progress and results in the Brexit talks. Only then will we decide whether conditions are there to call an extraordinary summit in November to finalise and formalise a deal."

However, even if a solution to the Northern Ireland border can be agreed there is still the issue of letting 650 Members of Parliament (MPs) vote on a potential deal. Theresa May now faces the uphill task of persuading the majority of the house to back a Brexit deal, but with a small proportion of Conservatives likely to shoot down any deal she will need to reach out across party divisions to secure the required votes.

So where does this leave the markets? I think the prospect of a no deal is dawning on us each day and it’s time to put this likely scenario into a trading plan.

So which market is likely to feel the brunt of a no deal? Sterling of course.

Sterling will be the market in focus for any outcome and just as we saw back on the 24th June 2016, expect declines on confirmation of a no deal. On the day of the referendum vote Cable saw a range of 1,700 pips as it just wasn’t expected for the UK to vote leave.  In the case of a no deal Brexit there doesn’t seem to be a clear cliff edge moment in view as behind the scenes talks are highly probable as time goes on. It will, however, paint a dismal picture if the upcoming 2-day summit fails to yield a positive result, or if the deal on the table is unlikely to pass the house.

Since the vote, we have seen Cable trade from 1.17 all the way up to 1.43, only for it to drop off in recent months to 1.26 in reflection to how the negotiations are heading. 1.25/1.27 seems a critical support zone, although we don’t seem out of the woods as we could be set for a further attack on this zone come 18th October. Below here then we are opening ourselves up for moves back to the scary lows of 1.20.

GBPUSD, Daily Chart
GBPUSD, Daily Chart, Under Pressure As Talks Look Doomed