However, State Street Head of Macro Strategy Lee Ferridge told CNBC that the market is underestimating the potential for any trade agreement between the U.K. and the EU to be "not a lot more than WTO rules," therefore almost equivalent to the no-deal scenario.
"I still don't think the market is really factoring in that in theory the no-deal risk is gone, because there is a deal now, but when we were talking about the no-deal Brexit, what people were really talking about was 'what's the trade agreement? What is the future trade relationship?'" Ferridge told CNBC on a phone call Wednesday.
The Bank of England on Thursday forecast anemic U.K. GDP growth of 0.8% in 2020, and Ferridge suggested that with uncertainty over trade keeping investment levels low, any concern over a breakdown in negotiations could send sterling back to the low 1.20s against the dollar. "We're around $1.30 now, we've been down to the low 1.20s before when people were worried about the no-deal Brexit, but if the realization is that really there isn't going to be that much of a free trade agreement - it's going to be less access to the single market than Canada has at the moment - then there's got to be every risk that sterling falls back to those low 1.20s we saw before, particularly if growth stays low.