Goldman Sachs has recommended clients go long sterling against the dollar, with a target of $1.30 compared with the pound’s current spot value of around $1.23, citing relatively low odds of a no-deal exit from the European Union.
It said it had issued the recommendation late on Friday because “the distribution of risks was skewed to the upside, even though the exact path ahead for Brexit remains uncertain.”
The bank noted the law requiring Prime Minister Boris Johnson to seek an extension to the Brexit deadline but also said the UK government’s new Brexit proposals had made it more optimistic that a deal would be struck.
“The odds of agreement by the end-October deadline may still be below 50%, but the distribution of risks for sterling has improved over the last month due to changes in the UK position on a number of issues and cross-party efforts to prevent no-deal,” Goldman Sachs said in a note received on Monday.
The UK was more likely to hold snap elections rather than exit without a deal, the note added.