# Here’s what a ‘shock no-deal’ Brexit could do to the pound

The European Union’s chief negotiator, Michel Barnier, reportedly told European lawmakers on Friday that there are “just a few hours left” for a deal to be struck.

Both sides have been casting doubt, with European Commission President Ursula von der Leyen citing worries about one key sticking point — fishing rights — and U.K. Prime Minister Boris Johnson has warned the population to prepare for a possible ‘no-deal’ outcome.

“Ultimately, a deal is in the favor of both sides and I still think that they will make a last-minute compromise,” said Fawad Razaqzada, market analyst at Think Markets, in a note to clients.

“If a deal is reached, hopefully this weekend, the pound could surge past the 1.35 handle, before potentially heading toward 1.40s. However, as the markets have — since March — been led to believe that a deal was going to be reached eventually, the greater risk is if the U.K. departs without a deal,” he said.

That outcome would prove a “shock” to markets and could send the pound down to $1.20, he said. His chart lays out the various scenarios for the pound, depending on how talks go.

Those Brexit pressures come as data showed U.K. retail sales tumbled in November as fresh COVID-19 restrictions kicked in. Tougher rules will be imposed from Saturday for millions in the U.K., and that comes amid the crucial Christmas holiday season.

Retailers were under pressure on Friday, with shares of Next
NXT,
-1.99%
and Kingfisher
KGF,
-2.28%
both down over 2%, and B&M European Value Retail’s
BME,
-1.36%
shares fell 1.5%. Wm Morrison Supermarkets’
MRW,
-1.73%
shares fell close to 2%.

“From a U.K. perspective, today’s figure highlights the potential suffering that the high street will endure as the virus continues to push physical sales online,” said Joshua Mahony, senior market analyst at IG, in a note to clients.