The pound is rallying and UK financial assets are being given a boost following news that a Brexit deal has been agreed between UK and EU negotiators before a meeting of European leaders in Brussels on Thursday.
The optimistic message from Nigel Green, the CEO and founder of deVere Group, one of the world鈥檚 largest independent financial advisory organisations, comes after the UK Prime Minister Boris Johnson and EU Commission President Jean-Claude Juncker confirm a deal has been agreed.
However, it will still need the approval of both the UK and European parliaments.
Mr Johnson tweeted: 鈥淲e’ve got a great new deal that takes back control.鈥�
Meanwhile, Mr Juncker wrote: “Where there is a will, there is a #deal – we have one! It鈥檚 a fair and balanced agreement for the EU and the UK and it is testament to our commitment to find solutions. I recommend that #EUCO endorses this deal.鈥�
Mr Green says: 鈥淭he pound has soared above $1.29 for the first time since May on reports that a Brexit deal has been reached and UK stocks are boosted in a relief rally.
鈥淗owever, the rally is currently being tempered as it needs to get through the UK and EU parliaments.
鈥淭here does seem to be some question marks remaining over the DUP鈥檚 support, which is, of course, critical to getting the deal through the House of Commons.
鈥淭hat said, there does seem to be a growing sense of optimism that it can get approved.鈥�
He continues: 鈥淚f this deal is ratified, we can expect the pound to jump sharply.聽 It is likely to hit at least $1.35 as the prospect of a no-deal, and/or months of further uncertainty ends.
鈥淪entiment towards UK stocks will also rally, particularly given the attractive valuations of many UK companies.
鈥淗owever a strong pound may dilute the impact on exporters, as their earnings in dollars and euros, amongst others, will become less valuable in sterling terms.鈥�
The deVere CEO concludes: 鈥淭here is potential for a significant relief rally for the pound and UK financial assets if this new Brexit deal is approved.
鈥淗owever, even if it is passed, this is really just the beginning 鈥� not the end.
“As such, investors need to protect themselves from market uncertainty and also best-position themselves for the inevitable opportunities through exposure to a broad range of assets, currencies and geographic regions.”
