Not a whole lot of optimism has been priced in
The firm's currency strategist, Lee Hardman, says that there is little optimism among market participants on the prospect of a cross-party Brexit deal arguing that the pound could rally as much as 1-2% if an agreement is reached.
Adding that the currency could strengthen by a further 2-4% if a compromise deal is reached and it is passed through parliament. However, Hardman notes that the firm is currently neutral on the pound as the market has already priced in a softer Brexit.
He says that "to build on gains from earlier this year, the pound would need to see a decisive breakthrough in Brexit talks".
I'm not a big fan of all these percentage talks/forecasts but sentiment-wise, the argument above is valid. As it stands, majority of the market isn't expecting a break in the current Brexit impasse or at least that's what the pound's pricing has been telling us.
There will always be the outside chance of cross-party talks succeeding so as long as that continues to be the case, the pound should not see much downside either unless we see May's position as Tory leader come under further threat or Corbyn decidedly walks away from talks with the government.