Investors are underestimating the impact of the U.K. and European Union (EU) failing to reach a trade agreement and the subsequent influence on sterling, according to a strategist at BofA Merrill Lynch.
The ramifications of a transitional trade agreement between the U.K. and the EU either falling through or eventually being agreed upon could have binary implications for sterling against the dollar, Thanos Vamvakidis, head of European G10 FX strategy at BofA Merrill Lynch, told CNBC on Friday .
"(That is) extremely important and I don't think the market is focusing enough on this issue…" Vamvakidis said.
"The Brexit negotiations will take two years (and) we know that the new trade agreement between the U.K. and the EU will take much longer. Usually it takes seven to ten years, (look at the) Canada deal with the EU which took seven years."