LONDON (Reuters) - Sterling should strengthen more than 5 percent from current levels to $1.36 and 85 pence per euro as consensus builds for a second referendum on Britain's European Union membership, BNP Paribas said on Thursday.
Its current base case was for Article 50 to be extended with a "second EU referendum the likely outcome, or even a pre-condition for an extension.
"Enough downside is priced in for now, in our view. The FX market appears to have priced in enough political and economic uncertainty," the French bank said.
The pound is currently trading at $1.2770 and 90.325 pence per euro.
(Reporting by Tommy Reggiori Wilkes, Editing by Abhinav Ramnarayan)