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Sterling stabilises at higher level as Brexit talks restart

Kitco News

LONDON (Reuters) - The pound slipped slightly against the dollar on Thursday, but held close to the six-week highs it hit in the previous session following news that stalled Brexit negotiations were due to resume.

Sterling rose by as much as 1.7% versus the dollar on Wednesday after the European Union’s chief negotiator Michel Barnier said that a deal was “within reach”.

It held close to those highs on Thursday, with the Brexit trade talks due to resume in the afternoon after negotiations were halted abruptly last week.

Francesco Pesole, FX strategist at ING, said that although the pound was rising and falling in response to comments about Brexit, the size of the moves was limited by a lack of certainty about the likelihood of a deal.

“Right now markets are ... just waiting for the tangible news, the real material progress to really buy and sell the pound,” he said.

At 1043 GMT the pound, which reached as high as $1.3177 on Wednesday, was at $1.3113, down around 0.3% on the day.

Versus the euro, the pound was slightly stronger on the day, at 90.23 pence, having strengthened to as much as 90.115 pence per euro in the previous session.

Britain left the EU in January and is currently in a status-quo transition period which ends on Dec. 31.

Prime Minister Boris Johnson said last week that the trade talks were over and told businesses to get ready for a no-deal outcome - comments that caused sterling to fall initially but were soon dismissed by market players as brinkmanship.

“Market participants were never convinced by the political posturing as the pound held its ground, and they are now more convinced that both sides are heading towards a trade deal,” MUFG currency analyst Lee Hardman wrote.

The Bank of England’s chief economist said on Thursday that the central bank was not poised to deploy negative rates.

“At the moment really the pound is about Brexit and the Bank of England,” said ING’s Pesole.

“What appears to be the Bank of England decision to possibly jump into negative rates is a function of Brexit. So that’s why it all boils down to Brexit and that’s why it’s the only thing that’s moving the market,” he added.

The pound did not react to Britain’s finance minister unveiling new measures to protect jobs.

Reporting by Elizabeth Howcroft; Editing by Gareth Jones and Pravin C

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