MUFG Research discusses the potential implications of a Brexit deal being reached at the EU summit next week.
"Brexit Secretary Dominic Raab came to parliament yesterday to update MPs on negotiations and reportedly stated that the government was “closing in on workable solutions to all of the key outstanding issues”.
If a compromise is agreed and a withdrawal agreement is as good as confirmed next week in time for a formal sign-off at a summit in November the pound is set for further out-performance. Our 1.3400 GBP/USD forecast for year-end could quickly look conservative while our 1.1800 EUR/USD target might not look so stretched," MUFG argues.
"If a deal does transpire, the obvious focus of financial market participants will shift immediately to the uncertainty of whether the agreed deal will get through parliament. This uncertainty will likely temper to some extent the scale of the rally," MUFG adds.