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Sterling edges lower after recent bounce on Brexit deal hopes

Kitco News

LONDON (Reuters) - Sterling edged lower on Monday, although sentiment towards the pound was better than in recent sessions as investors hoped Britain and the European Union could make some progress in Brexit talks.

The pound last week had its strongest run in two months, helped by investors cutting their bets against the currency and some buying from traders who believe Britain can avoid a no-deal Brexit in October, when the country is due to leave the EU.

Prime Minister Boris Johnson will meet French President Emmanuel Macron and German Chancellor Angela Merkel this week ahead of a G7 summit on Aug. 24-26 in Biarritz, France.

Johnson on Monday called on France and Germany to change their position on Brexit and negotiate a new exit deal.

The pound weakened 0.2% against the euro to 91.50 pence. Versus the dollar, the currency edged 0.1% down to $1.2134.

Johnson has repeatedly said Britain is leaving on Oct. 31 with or without a deal but the prospect of a no-deal Brexit hammered the pound in early August, sending it to two-year lows.

The pound hit a near three week high against the euro on Friday at 90.91 pence.

“The euro/sterling bounce has taken it back towards the middle of the recent trading range. Around 90-90.50 pence is a good support for the pound and unless we see some real progress on Brexit negotiations we should see the pound settle here,” said Adrian Schmidt, chief FX strategist at Continuum Economics.

“I expect the pound to be increasingly volatile as the deadline approaches and more and more desperate measures get considered in public and probably even tried in real life,” said Marshall Gittler, a strategist at ACLS Global.

“Hopes that something will be found to prevent a no-deal Brexit will send GBP up, as they did on Friday, but then the currency will come back down once it’s realized that those hopes are unfounded.”

Reporting by Saikat Chatterjee and Tommy Wilkes; Editing by Toby Chopra

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