The firm says the pound has the potential to fall to historic lows against the dollar in the worst-case Brexit scenario
In a note by the firm's strategists, they argue that the intense selling pressure in the pound since Theresa May's resignation has left markets with increased concern that the UK may be heading towards a harder Brexit scenario.
Adding that "should this scenario materalise, GBP/USD could fall into the 1.00-1.10 range". But in the mean time, they see that if the new British prime minister decides to pursue a tough negotiation stance, then that could take cable down to the 1.10-1.20 range.
Looking at where the pound is trading today, their worst-case scenario for the quid would mean a ~19% fall in the currency against the dollar from current levels. That would make quite the comparison to the ~25% fall on Black Wednesday back in 1992.
As a trader it's perennially hard to try and pick a bottom when something like this happens in real-time, but when it does you've got to know that you shouldn't stand in front of the moving train and just hop on for the ride instead.
Just remember, never ever catch a falling knife and it's always better to be late to the party than to be too early in trying to pick at "reversal points".
