© Reuters.

By Yasin Ebrahim

Investing.com – The pound marched higher against the dollar on Tuesday, as the U.K. and EU prepared to get post-Brexit talks underway, but an analyst warned that sterling’s strength will fade as time is running out for both sides to strike a deal.

rose 0.60%, to $1.2570.

With the clock ticking down on the opportunity for the U.K. and EU to agree a trade deal before the Brexit transition ends in December, sterling is likely to weaken, RBC’s Adam Cole warned.

The U.K. and EU have struggled to find a compromise on key sticking issues including the level playing field, security and fisheries. Ahead of post-Brexit talks, set to get underway on Wednesday, both sides have given little sign that the deadlock will be broken.

The EU “wants an agreement … but not at any price,” EU negotiator Michel Barnier said.

RBC has warned the threat of a no-deal Brexit is growing. “As time ebbs away and the two sides remain far apart, risks of a no deal, or a deal on unfavorable terms for the U.K. are growing.”

For the fourth quarter, RBC sees GBP/USD falling to 1.22 from 1.2574 at present and expects the currency pair to continue to fall in 2021 as the U.K. may require a weaker currency to prop up the economy.

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