You might imagine that there's
a huge sigh of relief spreading
around sterling traders but
you would not be quite right.
The currency has rocketed
over the past week.
Ever since UK Prime
Minister Boris Johnson
held what appeared to have
been constructive talks
with his Irish counterpart
Leo Varadkar, in Merseyside,
traders and investors have been
able to see in the distance
the vague outline of what
appears to be a deal on Brexit
between the UK and EU.
Suddenly, those predictions that
the pound could drop to $1.10
or even lower are
being ripped up.
Instead, it's shot up from
around $1.22 to $1.28.
This is the market's
way of saying
it thinks the no-deal
Brexit bombshell has
been safely defused.
Banks are starting
to send out advice
to their investor clients
about what happens next.
What is the trade if
- bear with me here
- everything goes right?
It's not just to buy sterling.
Homebuilder stocks, bank
stocks, and investments
with a purely domestic
UK focus are all
thought to be in
line for a boost.
And indeed, they've
already rallied.
UK government bonds, a bolt hole
for those worried about Brexit,
also stand to fall.
So what's not to like?
Well, Brexit has
turned snatching defeat
from the jaws of success
into an art form.
There is so much that
can still go wrong.
We're still beset by headlines
suggesting a deal is on,
and then it's still
far too early to say.
The shorts, the negative bets,
have peeled away from sterling,
but few are brave enough to dive
in and buy for the long term
just yet.
UK markets still have
a long way to climb
if a deal goes through.
The end to this drama feels
close, but we're not there yet.
