What's really changed on Brexit?

What's really changed on Brexit?

Theresa May is in Brussels today in hopes of finding a way to get a Brexit vote through parliament. The latest uptick in the pound came after comments from Spain's foreign minister, who said "I think the accord is being hammered out now."

Maybe he knows something that no one else does but I doubt it. Everything leaks from Brexit negotiations and Spain's foreign minister wouldn't be at the centre of talks.

What's more instructive is that cable is in a four-day rally to 1.3075 from 1.2800 and it all comes on vague positive hints with little concrete behind them. Yes, no one wants a hard Brexit, but there is little sign of a true thaw in any workable path forward.

Commerzbank analyst Ulrich Leuchtmann has a good take:

It would seem that even small things are enough to make the GBP investors happy at present. I would warn against using this as an opportunity for poorly diversified GBP-long bets. The likelihood of a no-deal scenario seems to have fallen a little again, but certainly not far enough for tactical plays in GBP. As GBP risk in case of a no deal can be expected to be very significant, marginal changes in no-deal probabilities should not change the strategic attitude towards GBP risk. And in general the market reaction illustrates that the market reacts much more to GBP positive news than to GBP negative ones. That suggests that in case of a no deal scenario the market reaction could be very pronounced as many would be caught on the wrong foot.

I don't see a no-deal Brexit as even remotely realistic. Parliament simply wouldn't allow it but that doesn't diminish the headline risk between now and March 29.