Goldman Sachs is advising its clients to buy sterling, with analysts predicting that the UK and EU could reach a post-Brexit trade deal by early November.
Analysts at the US investment bank said that while the risk of a breakdown in negotiations could not be ruled out, their “core view” was that a “‘thin’ zero-tariff/zero-quota trade agreement will likely be struck by early November, and subsequently ratified by the end of December.”
Prime Minister Boris Johnson and European Commission president Ursula von der Leyen, agreed in a phone call on Saturday to step up Brexit talks to close “significant gaps” barring a new trade partnership.
Both sides said they have made some progress but had not reached a breakthrough.
Johnson said yesterday that he did not want the post-Brexit transition period to end without a new trade deal in place, but said he believed that Britain could live with that outcome.
“A joint statement issued on Saturday constituted a clear political signal that enough had been achieved to further intensify technical talks,” Goldman said.
The “perceived probability of ‘no deal’ will persist beyond the next European Council meeting in mid-October,” wrote analysts including the bank’s chief European economist, Sven Jari Stehn.
They suggested going “long” on the pound against the euro, targeting a rise to 87p, as opposed to the current price of 91p.
Sterling slipped slightly against the euro this morning following the update on negotiations over the weekend, falling 0.2 per cent to 90.7p.
The pound was broadly flat against the dollar, hitting $1.295 by mid-morning UK time.