Paul O’Connor, Head of the UK-based Multi-Asset Team, casts a wary eye over the latest push to get a Brexit agreement over the line.

The UK takes a big step towards Brexit, with today’s key announcement.  Parliamentary ratification is the next major hurdle to clear. With the DUP reportedly uncomfortable with the deal, the parliamentary arithmetic for Saturday’s vote is very hard to call.

If the Prime Minister does get the deal through Parliament on Saturday, then the UK is heading for a fairly hard, clean-break Brexit. If the vote fails, then a general election looks imminent. As the polls stand, the Conservatives would be expected to win that with a workable majority and a mandate to implement the sort of Brexit outlined in today’s deal.

The euphoric market response reflects the diminishing probability of a no-deal Brexit. While global investor scepticism about UK assets means that the rebound in sterling, gilt yields and UK stocks probably has further to run, we would be wary of extrapolating these moves too far.  The path to implementation might still be a bumpy one. Even if Boris Johnson does manage to close the deal, investor celebration of this might soon be dampened by the recognition that this is a fairly hard Brexit. The UK now faces a long period of weak economic growth, regulatory uncertainty and political scuffling with our largest trading partner.