Commenting on Sterling’s reaction to a Brexit deal being reached, Andy Scott, Associate Director at JCRA, said: “Sterling received another leg higher this morning after a Brexit deal was finally reached. While many in the market and the country will breathe a huge sigh of relief, after it appeared the DUP had once again scuppered the agreement, there is no doubt a high degree of caution among investors as the UK parliament has yet to have its say!
“Sterling has seen a dramatic couple of weeks. Rallying 6% versus the Dollar and 5% versus the Euro from its lows last Thursday, the currency’s best performance against the Dollar since 1985! However, Sterling still remains relatively weak. At the current level of 1.29 versus the Dollar and 1.16 versus the Euro, Sterling is still down 13% and 11% respectively compared to its peak on the eve of the referendum result. If the deal gets through parliament, we would expect the clarity it provides for a transition period to result in some further gains for Sterling, though the hit to economic growth from falling business investment and uncertainty will likely remain a concern.
“The fog of Brexit should now finally start to lift, providing a more certain path for businesses to plan and invest again, as well as a more stable and therefore more attractive currency.”