Pound may jump 10 percent

Financial and commodity markets analytics

After many months of uncertainty there are rumors swirling that a deal has been struck between the EU and the UK surrounding Brexit which has driven the pound significantly over the last 2 trading sessions

The deal may be announced as early as Monday according to some insiders which will proceed the meeting between EU ministers and if true, removes a major roadblock in the recovery of the British pound.

"GBP once again is being buoyed by expectations that some kind of Brexit withdrawal deal can be struck before the October 17th European Council working dinner on Brexit. We’ve been here before, but this GBP move might have a little further to run," says Christopher Turner, a foreign exchange analyst with ING Bank N.V.

If the EU and Britain can come to some sort of agreement, the sterling is poised to gain as much as 10 percent according Mike Amey the head of Sterling portfolios at PIMCO, the largest bond fund in the world.

He noted that the market was overly pessimistic on the Sterling, which has kept the currency undervalued, and in general, people were overly worried about a deal not being reached when in fact, both sides had too much to lose with this scenario

"Our base case is there will be some sort of co-operative solution," said Mr Amey.

 "We think both sides can achieve their political ambitions without creating a disruptive economic environment." He added.


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