MUFG reckons that is very much the case as the pound shows a muted reaction to reports of a long extension
The firm's analyst, Lee Hardman, says that the fact the pound hasn't rallied on the earlier headline here suggests that the market has already mostly priced in such an outcome. Adding that the muted response "could reflect some caution, with the market waiting to see confirmation after tomorrow's EU summit".
Hardman also argues that if a longer extension is confirmed, it would be more positive for the pound as the risk of a no-deal Brexit would be pushed further into the future, and that the likelihood of a softer outcome could increase further. However, he notes that there is also the risk of a period of higher political uncertainty if Theresa May is replaced and/or new elections are called moving forward.
I can't really argue against that at the moment but I reckon that the quid still has more room to run to the upside if we are in store for a long extension to December 2019 or March 2020. Sure, there may not be any clear cut solutions to break the current Brexit deadlock but it does increase the likelihood of a second referendum down the road in order for there to be some leeway in cross-party talks between the government and the Labour party.
