The pound has continued its upward trend in today’s trading session, after reports that UK Prime Minister Theresa May has secured a secret Brexit deal which will ensure that the UK remains in the customs union.
The deal would also include a solution to the Irish border which has been the major sticking point during Brexit negotiations.
If the rumors turn out to be true, many analysts see the British pound quickly rising to around $1.35 against it’s US counterpart with the possibility of $1.40 if parliament then approves the deal.
“Brexit deal optimism remains the flavor of the month, even ‘trumping’ the market’s love for the dollar,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA. “The consensus is that a deal will be reached, maybe this month or early December, and so positioning is adjusting.”
Even disappointing data released from the UK failed to dampen the pounds gains which goes to show that no matter what happens, the Brexit deal will be the main driver of the pound as the year closes out.
PMI services figures for October came in at 52.2, which was well down from 53.9 in September and also below analysts’ expectations for a figure of 53.4
The poor figures were attributed to the uncertainty surrounding Brexit which adds more evidence of a big relief rally I the making should a deal be done.
"The services PMI’s shortfall in October relative to its 12-month average, 53.9, adds to evidence that the economy is heading for a weak end to the year, due to slowing global growth and heightened risk of a no-deal Brexit," says Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.