Market participants are finding it extremely difficult to fully appreciate the risk of the world's fifth-largest economy being thrust into the unknown post-Brexit, one strategist told CNBC on Monday.
Moritz Kraemer, former chief sovereign analyst at S&P ratings agency, told CNBC's "Squawk Box Europe" on Monday that, at current levels, it is clear markets remain underprepared for the prospect a no-deal Brexit.
When asked whether sterling and Britain's FTSE 100 index accurately reflected the risk of a no-deal scenario, Kraemer replied: "No, I don't think so."
"This is not fully incorporated, partly because markets understandably have a very hard time (trying) to assess what this would actually mean … We have never been through anything remotely similar," Kraemer said.
A no-deal scenario is generally considered to be where the U.K. crashes out of the EU without any formal relationship and has to rely on WTO trading rules.
The U.K. currency has largely been viewed as a barometer of fear during Brexit negotiations, with sterling suffering steep losses against the dollar last week amid heightened political turmoil.
On Monday afternoon, sterling was down around 0.1 percent against the dollar, trading at around $1.2831. The British currency was as high as $1.3176 earlier this month, before a draft deal struck with the EU prompted a wave of government resignations.