The pound has slipped slightly in early trade but remains at a five month high against its peers as traders await developments on Brexit negotiations.

The currency has been highly reactive to developments in recent days with traders responding to every move with a rally or a sell off in sterling.

It went as far as 86.25 pence against the euro yesterday - its highest level since early May, before former Prime Minister Theresa May announced her intention to stand down.

It has since slipped towards 86.7 pence. 

Aidan Donnelly, Head of Equities with Davy, said the only certainty was that further volatility would ensue.

"With each news story, the pound is reacting and that's feeding through to equity markets too. Stocks deemed to have been negatively impacted by a hard Brexit are rallying on news of a potential deal. We've seen it in Irish stocks too."


 

Craig Erlam, Senior Market Analyst with Oanda, agreed that volatility would likely prevail but he said a deal would see a rapid move higher in the pound.

"These gains could pale in comparison to those we could see if (a deal) is confirmed today. One way or another, it could be an explosive day, albeit one that runs late into the night ahead of the meeting tomorrow. Sterling will be extremely volatile," he said.

An extension still looked to be the most likely outcome, he said, given the time constraints and existence of the Benn Act.

"That will be much easier for Boris and others to stomach if the outline of an agreement is at least in place. Of course, he'll most likely refuse to technically request it himself to avoid embarrassment during an election campaign," he added.