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Sterling might soar as excessive as $1.50 if lawmakers agree a Brexit deal earlier than the U.Ok. leaves the European Union, one strategist has advised CNBC.
Talking on CNBC’s “Squawk Field Europe” on Thursday, Hans Redeker, international head of FX technique at Morgan Stanley, stated the British foreign money could possibly be closely influenced by the end result of subsequent month’s European council assembly.
“You would see that there (will) be an settlement,” he stated. “Beneath these circumstances sterling will surely rally, and it might be a rally which goes to catapult it in opposition to the U.S. greenback — perhaps into the $1.40 and $1.50 deal with.”
The British pound plummeted beneath $1.20 final week, its lowest stage since a flash crash in October 2016.
British Prime Minister Boris Johnson is because of meet with EU leaders at a vital summit on October 17 and 18, the place he’s anticipated to resume negotiations for a deal earlier than Britain’s scheduled departure from the bloc on October 31.
Nevertheless, Redeker advised CNBC that Johnson securing a deal was “not but” Morgan Stanley’s base case, including that the pound might nonetheless tumble additional.
“Our view is that the pound has not but bottomed, however on the medium or long-term horizon you’ll have to look into U.Ok.-based property,” he advised CNBC. “The valuation is affordable for varied causes, not only for the overseas change — I count on there (will likely be) extra money coming right here and making an attempt to speculate.”
On Wednesday, the Hong Kong inventory change introduced that it had provided $36.6 billion to take over the London Inventory Change, a bid that Redeker stated was unsurprising given the present worth of the pound.
“While you have a look at that and say perhaps the draw back danger is all the way down to $1.15, it really means you’ve got an asymmetry and that’s the place the long-term investor is coming in… there are extra of these sort of bulletins coming,” he speculated.
Sterling was buying and selling at round $1.2336 on Thursday morning London time.