What's going on?

With the UK locked in tense negotiations with the European Union (EU) this week regarding the terms of its Brexit, some investors believe the value of the country�s currency could soon fall beneath longstanding lows.

What does this mean?

The coronavirus pandemic and its global ramifications have understandably loomed large in investors� minds this year. But as the December end of the UK�s EU withdrawal �transition period� draws nearer, analysts are increasingly worried about the prospect of a �no-deal� Brexit � or one in which the UK potentially breaks international law. If that happens, investors could ditch riskier global bets; and according to Allianz Global Investors, the pound�s value in US dollars could drop to $1.14 versus $1.30 now � its lowest since 1985.

Other analysts admittedly think that�s an unlikely scenario. Investment banks Goldman Sachs and Morgan Stanley, for example, reckon a deal is more likely than not � and most experts think the pound should increase in value against the dollar next year. Then again, you know what they say about experts�

Why should I care?

For markets: Bear trap.

A weak currency isn�t all bad news: foreign buyers getting more bang for their buck (or euro, or yuan) could buy more British products, boosting the UK economy. But investors might still be cautious: a seemingly attractive stock market valuation may belie weak post-Brexit UK company earnings growth potential. Those who�d bought British stocks might end up snared in a so-called �value trap�, hoping for a recovery that never comes.

The bigger picture: The lady is a tramp.

It�s not just the UK�s trade policy causing problems. French luxury goods giant LVMH on Wednesday pulled out of its planned $16 billion takeover of American jeweler Tiffany�s, blaming US trade taxes for making business more expensive and a deal less attractive. Tiffany�s now plans to sue to force through the purchase.