Photographer: Etienne Ansotte. © European Union, 2020. Source: EC - Audiovisual Service.

GBP/EUR spot rate at time of publication: 1.1030Bank transfer rate (indicative guide): 1.0740-1.0818FX specialist providers (indicative guide): 1.0867-1.0950More information on FX specialist rates hereThe British Pound is forecast to appreciate over coming days by analysts at Goldman Sachs, following positive developments concerning EU-UK trade talks at the weekend.

"We expect Sterling to appreciate by 1.5-2% against the Euro on the apparent progress towards a deal - or at least avoiding a no deal outcome for now," says George Cole, a foreign exchange strategist at Goldman Sachs in London.

The Pound-to-Euro exchange rate gapped higher at the start of the new week amidst renewed buying interest following the weekend decision by the EU and UK to extend negotiations on their future relationship.

The EU warned last week that they would walk away from talks were no progress to have been made by Sunday, leading to a sharp sell-off in Sterling.

The rally of 1.5%-2.0% envisaged by Goldman Sachs in the near-term would effectively unwind the risk premium that has built up in Sterling in recent days.

Indeed, there will remain "meaningful uncertainty about the likely course and end-state for the weeks ahead at this late stage in the negotiations," says Cole.

The Pound-to-Euro exchange rate fell to a low of 1.0834 on Friday as investors pared exposure to Sterling ahead of the weekend's crunch showdown between EU Commission President Ursula von der Leyen and UK Prime Minister Boris Johnson.

The exchange rate is quoted at 0.52% higher on where it started the day at 1.1024.

Above: The Pound gaps higher against the Euro in early Asia trade on December 14.

"Despite the exhaustion after almost a year of negotiations, despite the fact that deadlines have been missed over and over we think it is responsible at this point to go the extra mile," said EU Commission President Ursula von der Leyen in a statement released on behalf of her and UK Prime Minister Boris Johnson on Sunday 11:45 GMT.

Goldman Sachs maintain a base case position that a "thin" free trade agreement (FTA) will be reached before the end of the year.

"That said, there is plenty of uncertainty around this; the risk of a no deal outcome persists," says Cole.

Should a 'no deal' Brexit take place, Goldman Sachs forecast the Pound-Euro exchange rate will fall to 1.04.

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"Signs that the UK and EU are still modifying their proposals and working towards a deal at this late hour should prevent markets and businesses from fully anticipating a no deal “end-state” even if the EU and UK fail to reach an agreement before 31 December," says Cole.

Beyond Brexit, analysts at Goldman Sachs are keeping an eye on the evolution of the covid-19 crisis, and say a vaccine-driven recovery will benefit the UK economy more than others.

"While Brexit-related changes will mostly take years to be fully realised, the Covid pandemic will continue to dominate the cyclical outlook over the next few months. The UK’s highly cyclical, service-led economy should be well suited to bounce back after vaccinations. We expect that certainty on the Brexit process will bring GBP to the top of investors’ mind as they search for assets that can benefit as business restrictions are lifted," says Cole.

The call comes after the UK became the first country to roll out the Pfizer-BioNtech vaccine on December 08 and December 14 will see the programme accelerated to include local GPs.

Goldman Sachs are holding a base-case forecast that the Pound-Euro exchange rate recovers to 1.15.