Commenting on how Sterling is rallying following encouraging news of a potential Brexit deal, Andy Scott, Associate Director at JCRA, the independent financial risk management consultancy, said: “Sterling is rallying this morning following encouraging news reports on a potential Brexit deal that could be agreed within the next few weeks. Earlier this week Sterling slumped to a two-month low of 1.27 versus the US Dollar as the Brexit impasse and domestic political concerns prompted investors to sell. Following this morning’s Times report that the UK and EU have reached a tentative deal on financial services and data sharing, along with comments from Dominic Raab that a deal will be reached by November 21st, Sterling has strengthened by over one percentage point versus the Dollar to 1.29. While the UK government and the EU have been insisting on calm as negotiations reach the final crucial stages and time runs short, investors are forced to navigate the on/off nature of these negotiations. We’ve seen many false dawns when a deal seemed imminent, only to be repeatedly disappointed as negotiations broke down, often due to the Irish border issue. As the clock ticks down, investors and speculators are treating positive headlines with growing scepticism. So this rally might also run out steam if no formal agreement is reached to back up these latest reports.
“The stakes are high, particularly for the UK. The fact that a deal hasn’t been reached yet is reason enough for many to significantly doubt that one can be reached in time. It took an 11th hour deal to prevent Greece from leaving the Euro and potentially bringing down the entire Eurozone, despite vociferous opponents to the bail-out. So it seems only logical that the interdependence of the UK and EU’s relationship, least of all in economic terms, will ultimately lead to an agreement. Let’s just hope they don’t leave it quite as late as they did with Greece, or we’re in for another 148 days of deal or no deal!”