Britain’s pound presents the biggest opportunity within developed-market currencies with a probable break-the-Brexit logjam moment coming soon, according to Goldman Sachs.
“We’re coming to a big finish here,” said Zach Pandl, Goldman’s co-head of global foreign exchange and emerging market strategy after the UK Parliament again rejected all alternatives to Prime Minister Theresa May’s unloved deal to leave the European Union. “We do think we’re making progress despite these failed votes.”
Instead of a prolonged stalemate or a chaotic no-deal scenario, Mr Pandl told Bloomberg a soft Brexit approach, which may include a permanent customs union packaged with a second referendum, could come within the next day or two.
“Sterling is maybe the biggest opportunity among developed market exchange rates today,” Mr Pandl said. The pound was at $1.307 as of 9.35am UAE time.
Parliament rejected a proposal to stay in the EU’s trading arrangement , known as the customs union, by just three votes. It could potentially be voted on again on Wednesday.
However, forex investors continue to be occupied by the ongoing Brexit drama, Agence France-Presse reported.
Brussels has set an April 12 deadline to agree to the divorce deal, settle on an alternative or crash out of the bloc, which most observers warn will be economically calamitous.
Mrs May was to call in her cabinet to discuss the next steps but while investors are averse to uncertainty, there is still hope that parliament will avert a no-deal exit, which is keeping the pound from plunging.
"While no-deal risks grow, the base case remains for the UK to get a longer extension from the EU to start over from scratch," said Oanda senior market analyst Edward Moya.
"May will discuss her options tomorrow in a cabinet meeting, but it appears she may try to push through another attempt of getting her deal across the finish line."
Separately, Goldman has closed its short recommendation on the US dollar against the Japanese yen, Mr Pandl said.
“We think we’ve seen enough data to indicate that the global industrial cycle at least on the margin is picking up,” Mr Pandl said. “It’s a little bit too risky to be betting on yen appreciation over the short run.”