UK close to reaching Brexit deal, hedge fund executive says

Imminent deal ‘overwhelmingly probable’, Stephen Jen says

British and EU officials are locked in talks in Brussels over a compromise that could see the UK remain temporarily in the EU’s customs regime, people familiar with the negotiations have said. Photograph: iStock

British and EU officials are locked in talks in Brussels over a compromise that could see the UK remain temporarily in the EU’s customs regime, people familiar with the negotiations have said. Photograph: iStock

 

The UK is close to reaching a deal on Brexit, setting the stage for a potentially historic appreciation of the embattled pound, according to hedge fund executive Stephen Jen.

“An imminent deal is overwhelmingly probable,” wrote the chief executive of London-based hedge fund Eurizon SLJ Capital in a note on Tuesday. “The chances of a no-deal hard Brexit are very low, and a deal in the coming weeks will likely allow the pound to rally.”

Sterling is “very under-valued and under-owned,” Mr Jen said. “It is still reasonable to view 1.55 as a valid fair value and the center of gravity for cable,” he said, using the trader term for the pound-dollar exchange rate. That would be an 18 per cent surge from the $1.3161 it traded at as of earlier today.

With just a week before a crucial summit of European Union leaders that could determine the outcome of Brexit, optimism is growing a deal may be in sight. British and EU officials are locked in talks in Brussels over a compromise that could see the UK remain temporarily in the EU’s customs regime, people familiar with the negotiations have said.

On the Mend

Hopes for a deal already have helped the pound gain almost 4 per cent since mid-August, paring its decline for the year to less than 3 per cent.

After it leaves the union, Britain’s challenges will be daunting, but perhaps more predictable and more within its own control than the EU talks have been, according to Mr Jen, a former International Monetary Fund economist.

Calling “Doomsday forecasts” misguided, he said the UK has “ample” soft power to deal with its future once it is able to negotiate trade deals with countries such as the U.S., China, Japan, Canada and Australia, which collectively account for 22 percent of its exports -- versus 42 percent and falling for the EU.

“The pound may be volatile in the short-term, but its positive long-term outlook is more certain than many other Group-of-10 currencies,” he said. “The upside is substantial, against both the dollar and the euro.” – Bloomberg