Market participants are aware that the Brexit issue is about to be escalated once again but how Europe responds will dictate any potential market reaction. Unilateral action by the UK will hit the pound, economists at MUFG Bank report.

Legislation on Brexit protocol coming soon

“We see it as quite likely now that this issue is going to escalate over the coming weeks and unilateral action by the UK could kick off a period of elevated uncertainty that will start to weigh on GBP performance.”

“The EU could threaten scrapping the entire Trade & Cooperation Agreement; it could suspend the trade parts of the TCA; or it could take actions like suspending access to EU waters within seven days. The pound will get hit if these options are even mentioned as considerations by the EU.”