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’s 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: “We've got a great new deal that takes back control.”
Meanwhile, Mr Juncker wrote: "Where there is a will, there is a #deal - we have one! It’s 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.”
Mr Green says: “The 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.
“However, the rally is currently being tempered as it needs to get through the UK and EU parliaments.
“There does seem to be some question marks remaining over the DUP’s support, which is, of course, critical to getting the deal through the House of Commons.
“That said, there does seem to be a growing sense of optimism that it can get approved.”
He continues: “If this deal is ratified, we can expect the pound to jump sharply. It is likely to hit at least $1.35 as the prospect of a no-deal, and/or months of further uncertainty ends.
“Sentiment towards UK stocks will also rally, particularly given the attractive valuations of many UK companies.
“However 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.”
The deVere CEO concludes: “There is potential for a significant relief rally for the pound and UK financial assets if this new Brexit deal is approved.
“However, even if it is passed, this is really just the beginning – 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."