Pound skeptics turn believers as UK nears Brexit divorce deal

Bloomberg

Even fund managers who were once shunning the pound are now betting on a rally as the UK inches towards a Brexit divorce deal.
Allianz Global Investors, which has been consistently short the pound since the referendum in 2016, has switched to multiple long positions on the currency.
Union Bancaire Privee sees volatility rising and is looking to buy sterling on conviction it is undervalued.
Sterling had been on a downtrend this year as the deadline to pull out of the European Union drew closer. The mood has changed this month, spurring a rally in the pound, with optimism that a divorce deal can be struck as early as next week even as the Irish border continues to be the biggest hurdle.
“Ultimately, our view is that a deal gets done so the pound goes much higher,” said Kacper Brzezniak, a portfolio manager at Allianz, which oversees 524 billion euros ($598 billion) in assets. “And if it’s voted down in Parliament, I think the more likely outcome would then be towards remaining in the EU, rather than no deal.”
Sterling weakened Friday after the Northern Irish party supporting UK Prime Minister Theresa May expressed concerns about plans for the border, and with the dollar rallying. The currency slipped 0.4 percent to $1.3011 in London, ahead of UK economic data.
Brzezniak is targeting $1.35 in the short term and $1.40 within a year against the greenback, matching a level seen in a Bloomberg survey of analysts. He has long positions against the euro and Australian dollar as well, while UBP’s currency head Olivier Doleires is also buying against the Swiss franc.
Previously, with the risk wide open for either a jump to $1.50 or a slide to $1.20 on no deal, investors were favoring bets on a move in either direction or on volatility, seen as relatively cheap even as uncertainty increased. A straddle trade, which profits on a sharp shift, has done very well, said Brzezniak.