There's been no lack of optimism in the markets around the prospects for a Brexit deal in recent months, despite the ultimate deadline now only a couple of weeks away.
There have been signs of nerves creeping in the last couple of weeks but broadly speaking, it's clear there's a sense of "the Boris who cried wolf" about all of this. Despite all the threats, the warnings, the claim that an "Australia-style deal" - otherwise known as no deal - will suit us fine, a deal is overwhelmingly the preferred option. And to be fair to the Prime Minister, these disingenuous claims haven't just been coming from his side of the negotiating table.
The one time there's been a real sense of worry was heading into the weekend when leaders' claims a firm decision would be made Sunday. And I'm sure the fact that the markets wouldn't be open then fed into the movements in the currency on Thursday and Friday.
So here we find ourselves, trading right around a two and a half year high, just waiting for the moment when both sides will acknowledge that a breakthrough - THE BREAKTHROUGH - has finally happened. But that immediately makes me wonder, if markets are so convinced it's going to happen anyway, how much upside can we really be looking at?
Obviously that's incredibly difficult to say, especially when the knee-jerk reaction could be quite extraordinary, driven by a number of factors that go beyond just what the fair value now is.
Can it break above 1.40? I'm not so sure, that may be a step too far. And let's fact it, a 3.7% move (from current levels) is quite a move in the FX markets, especially for something that's already priced in. Sure, we could find ourselves there in a few months, especially given the direction of travel of the dollar.
One risk right now is that we get a big jump on any announcement, quickly following by a lot of profit taking, with the currency giving up a sizeable portion of those gains. It's going to be extremely volatile and, who knows, it could even end up back where it started, or lower.
It's also worth remembering that the US is in the midst of stimulus negotiations itself. Not to mention this evening's Fed decision which could even threaten this level if the Fed makes a bold move. It's going to be the pair to watch into year-end.
There have been signs of nerves creeping in the last couple of weeks but broadly speaking, it's clear there's a sense of "the Boris who cried wolf" about all of this. Despite all the threats, the warnings, the claim that an "Australia-style deal" - otherwise known as no deal - will suit us fine, a deal is overwhelmingly the preferred option. And to be fair to the Prime Minister, these disingenuous claims haven't just been coming from his side of the negotiating table.
The one time there's been a real sense of worry was heading into the weekend when leaders' claims a firm decision would be made Sunday. And I'm sure the fact that the markets wouldn't be open then fed into the movements in the currency on Thursday and Friday.
So here we find ourselves, trading right around a two and a half year high, just waiting for the moment when both sides will acknowledge that a breakthrough - THE BREAKTHROUGH - has finally happened. But that immediately makes me wonder, if markets are so convinced it's going to happen anyway, how much upside can we really be looking at?
Obviously that's incredibly difficult to say, especially when the knee-jerk reaction could be quite extraordinary, driven by a number of factors that go beyond just what the fair value now is.
Can it break above 1.40? I'm not so sure, that may be a step too far. And let's fact it, a 3.7% move (from current levels) is quite a move in the FX markets, especially for something that's already priced in. Sure, we could find ourselves there in a few months, especially given the direction of travel of the dollar.
One risk right now is that we get a big jump on any announcement, quickly following by a lot of profit taking, with the currency giving up a sizeable portion of those gains. It's going to be extremely volatile and, who knows, it could even end up back where it started, or lower.
It's also worth remembering that the US is in the midst of stimulus negotiations itself. Not to mention this evening's Fed decision which could even threaten this level if the Fed makes a bold move. It's going to be the pair to watch into year-end.