"We've been here before," is the cautious response. Nevertheless, a deal emerging from the negotiating "tunnel" has rallied markets and expectations.

Sterling welcomed Thursday’s news that the UK prime minister Boris Johnson and EU Commission president Jean-Claude Juncker have confirmed that a deal has been reached. Juncker tweeted: "Where there is a will, there is a #deal - we have one! It’s a fair and balanced agreement for the EU and the UK and it is testament to our commitment to find solutions. I recommend that #EUCO endorses this deal.” The big question, however, is whether it will now pass the scrutiny of both the UK and European parliaments. Here fund managers and economists give their market reactions and lay out the various scenarios we can expect in the next few days. The latest State Street poll of institutional investors on Brexit showed that two-thirds (66 per cent) believed that the UK leaving without a deal on 31 October would have a negative impact on markets globally.

Dean Turner, UK economist, UBS Global Wealth Management
“Amid fresh optimism about a Brexit deal, it is important to remember that the agreement must still be voted on by the EU27 heads of state, as well as the UK Parliament. As things stand, parliamentary ratification is far from certain.

“The outcome that investors feared the most, a no-deal Brexit, seems less likely now than at any time in the last few months. If parliament does not ratify the deal and a general election is called, Boris Johnson will most likely campaign on the platform of having secured an agreement. The Labour Party, on the other hand, has confirmed it will push for the new agreement to be put to a second referendum.

“As has typically been the case with Brexit newsflow in the past, moves within the UK equity market are likely to remain more significant than moves in the overall UK equity market. On sterling, we retain our overweight position versus the US dollar in our FX strategy. If a deal is at last reached, we may even see GBP/USD rally to 1.35. If MPs do not agree on a deal after all and we are faced instead with an extension, followed by a general election, we would more likely see GBP/USD settle between 1.26 and 1.32. The looming no-deal Brexit scenario, which could have flung GBP/USD as low as 1.12, now appears the least likely outcome.”

Artur Baluszynski, head of research at Henderson Rowe
“Big win for Boris. If he manages to get it through parliament, we should see a wave of “risk-on” trades coming into [the] UK market. However, let us wait and see all the details and then let the markets decide how likely it is for the UK parliament to accept it. For now, expect some positive momentum in sterling and domestically focused asset classes.”

Andy Scott, associate director at JCRA
“Sterling received another leg higher this morning after a Brexit deal was finally reached. While many in the market and the country will breathe a huge sigh of relief, after it appeared the DUP had once again scuppered the agreement, there is no doubt a high degree of caution among investors as the UK parliament has yet to have its say!

“Sterling has seen a dramatic couple of weeks. Rallying 6 per cent versus the dollar and 5 per cent versus the euro from its lows last Thursday, the currency’s best performance against the dollar since 1985! However, sterling still remains relatively weak. At the current level of 1.29 versus the dollar and 1.16 versus the euro, sterling is still down 13 per cent and 11 per cent respectively compared to its peak on the eve of the referendum result. If the deal gets through parliament, we would expect the clarity it provides for a transition period to result in some further gains for sterling, though the hit to economic growth from falling business investment and uncertainty will likely remain a concern.

“The fog of Brexit should now finally start to lift, providing a more certain path for businesses to plan and invest again, as well as a more stable and therefore more attractive currency.”

Adrian Lowcock, head of personal investing at Willis Owen
“Boris Johnson’s announcement of a great new deal has gotten currency markets excited but investors should be wary, we have been here before and it didn’t end well. There is still a lot of work to be done. However, what is clear from the initial reaction is that the Brexit issue has been weighing on the UK currency and indeed stock market. Events over the weekend will be the deciding factor.

“Whilst investors shouldn’t get too excited if a deal is done, there is the potential for markets to rally quickly on the news. The UK market has looked cheap for a while and there are some attractive opportunities. However, because there are still many risks, the best course of action is to be diversified as this will give you the flexibility needed to navigate a complex situation.”

Keith Wade, Schroders’ chief economist and strategist
“We do not have the full details as yet, but if the deal passes through parliament on Saturday we should see stronger growth in the UK economy as the cloud of Brexit uncertainty lifts. Importantly, this is a big step toward avoiding a no-deal Brexit where the UK would have crashed out of the EU possibly causing a damaging recession.

“To get the deal through Parliament the Prime Minister (PM) will require the support of the hard-core Brexiteers (European Research Group), the 21 Tory rebels expelled from the party and around 17 Labour MPs, on the basis that the DUP votes against. However, assuming the vote goes through, we will move into a transition period until at least the end of 2020 during which time the UK and EU will start to hammer out a trade deal.

“There will still be some uncertainty about the UK’s future relationship with the EU, nonetheless the likelihood of avoiding a no-deal is increasing. As this tail risk fades, sterling can be expected to rally further and gilt yields rise as investors anticipate a better economy and a firmer monetary policy. Of course, if the deal fails in Parliament on Saturday we are back to where we started. Either way PM Johnson is likely to call a general election.”

Paul O’Connor, head of the UK multi-asset team at Janus Henderson
“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 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.“

Colin Morton, portfolio manager, Franklin UK equity team
“Markets have responded positively to the news that Boris Johnson is on the verge of agreeing a Brexit deal. We’ve seen sterling rally and shares in UK domestic stocks have buoyed following the announcement that an agreement had been reached with the European Union. In particular, we expect to see real estate, housebuilders, financials and UK consumer stocks to do well if a Brexit deal is agreed by parliament on Saturday. In our view, this would be a good outcome for both the UK economy and stock market as it creates the certainty that investors have been craving.”

Nigel Green, founder and CEO of deVere Group
“The pound has soared above $1.29 for the first time since May on reports that a Brexit deal has been reached and UK stocks are boosted in a relief rally.

“However, the rally is currently being tempered as it needs to get through the UK and EU parliaments. There do seem to be some question marks remaining over the DUP’s support, which is, of course, critical to getting the deal through the House of Commons. That said, there does seem to be a growing sense of optimism that it can get approved.

“If this deal is ratified, we can expect the pound to jump sharply. It is likely to hit at least $1.35 as the prospect of a no-deal, and/or months of further uncertainty ends. Sentiment towards UK stocks will also rally, particularly given the attractive valuations of many UK companies.

“However a strong pound may dilute the impact on exporters as their earnings in dollars and euros, amongst others, will become less valuable in sterling terms. There is potential for a significant relief rally for the pound and UK financial assets if this new Brexit deal is approved.

“Even if it is passed, this is really just the beginning – not the end. As such, investors need to protect themselves from market uncertainty and also best-position themselves for the inevitable opportunities through exposure to a broad range of assets, currencies and geographic regions."