Tag: Sterling

Sterling edges up against dollar but falls versus euro; Brexit talks in focus

Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON, Oct 9 (Reuters) – Sterling edged up against the dollar but fell against the euro after worse-than-expected UK GDP data, while investors focused on Brexit negotiations where the “mood music” was seen to have improved.

Britain’s GDP rose 2.1% in August – the slowest increase since the economy began to recover in May from its record slump. Much of what growth occurred was down to the government’s one-off restaurant subsidy scheme.

The data had limited impact on the pound, which was in its third consecutive day of gains against the dollar and only slightly down versus the euro.

Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, said that the GDP data, which calls into question the idea of a V-shaped recovery, had little effect on the market since it was already expected that local lockdown measures would limit economic growth in the fourth quarter.

At 0808 GMT, sterling was at $1.2953, up 0.2% on the day against the dollar. The greenback was heading for a second week of losses as investors increased bets that Joe Biden would win the U.S. presidential election on Nov. 3 and offer fiscal stimulus afterwards.

Versus the euro, the dollar was up around 0.2%, at 91.05 pence per euro EURGBP=D3.

The week has proven volatile for the British currency as Britain and the EU negotiate their future relationship. Hopes that a no-deal Brexit will be avoided have risen in recent days, ahead of the European Council meeting on Oct. 15-16.

Both sides in negotiations have said a deal is possible, but the pound has ricocheted on contradicting headlines about how much progress has been made.

“The last two weeks have seen some brutal whipsawed price

…

Sterling tops $1.30 as investors push back negative rate expectations

By Tom Wilson

LONDON, Oct 6 (Reuters) – Sterling climbed above $1.30 on Tuesday for the first time in three weeks as investors pushed back expectations for when the Bank of England would cut interest rates below zero.

The pound gained 0.3% in early trading to touch $1.3006, the first time it had broken the mark since mid-September, before giving up its gains. It was last down 0.1% at $1.2962.

Money markets pushed back bets that Britain’s interest rates would turn negative, with investors now seeing rates falling below zero in May 2021. Previously they had expected the Bank of England to cut rates into negative territory in March. BOEWATCH

The BoE, which cut interest rates to a record-low 0.1% in March, is looking at whether it is technically feasible to cut its main interest rate below zero, something that has already been done in Japan and the euro zone.

Bank of England rate-setter Jonathan Haskel said on Monday he saw downside risks to the economy – and also some possible benefits – from cutting interest rates below zero.

The BoE’s chief economist, Andy Haldane, and one of its deputy governors, Dave Ramsden, have expressed doubts about whether negative rates would be helpful. One external policymaker, Silvana Tenreyro, has been more supportive.

“They are still keeping the option open that negative rates could help support the recovery,” said Lee Hardman, currency strategist at MUFG.

Sub-zero rates would likely weaken the pound, at least in the short term, he added.

The pound was flat against the euro EURGBP=D3, last trading down 0.1% at 90.83 pence.

Also supporting sentiment was cautious optimism towards Britain’s trade talks with the European Union. Most analysts now expect London and Brussels to reach a deal before the transition deadline.

Still, Prime Minister Boris Johnson’s

…

Sterling weaker vs euro, focus remains on Brexit

LONDON (Reuters) – Sterling fell against the euro on Monday, although losses were limited as most analysts said they expect Britain and the European Union to soon conclude a Brexit deal.

FILE PHOTO: Queen Elizabeth II is seen with printed medical masks on the Pound banknotes in this illustration taken, March 31, 2020. REUTERS/Dado Ruvic/Illustration

Versus the broadly weaker U.S. dollar, the pound rose.

British Prime Minister Boris Johnson and the head of the EU’s executive, Ursula von der Leyen, agreed in a phone call on Saturday to step up Brexit talks to close “significant gaps” barring a new trade partnership.

Both sides said they have made some progress but not achieved yielded a breakthrough.

The EU must show “more realism” if it wants to bridge differences with Britain on fisheries, a spokesman for Johnson said on Monday.

Johnson does not want the Brexit transition to end without a new trade deal in place, he said on Sunday, but he believes Britain could live with such an outcome.

“While we have frequently cautioned that the more uncertain global backdrop has made it harder to express views on the Brexit process in the currency this year, we are encouraged by the pound’s increasingly idiosyncratic price action as the negotiation deadlines draw near,” Goldman Sachs analysts wrote in a note to clients.

Goldman Sachs saw the pound strengthening to 87 pence against the euro and said “investors with a stronger conviction that risk conditions will improve into year-end should consider expressing the view in cable (sterling/dollar) to also benefit from likely dollar depreciation.”

The derivatives market showed that traders have bought more protection against future pound volatility. The cost for one-month options — which encompass the timing of a possible Brexit deal — in sterling/dollar are around their highest level in the

…

Sterling extends losses as markets reassess no-deal Brexit risk

By Elizabeth Howcroft

LONDON, Oct 1 (Reuters) – Sterling fell against the dollar and the euro on Thursday after a report that Britain and the EU were still far apart on the key issue of state aid in Brexit trade talks, with the launch of an EU legal case against the UK dealing another blow.

British and EU trade negotiators have failed to close the gap on state aid rules, an issue which is preventing them from reaching an agreement on post-Brexit trading rules, officials and diplomatic sources said.

Britain said there are still differences between the two sides in negotiations, but that London will work hard to try to secure a deal before its transition period after leaving the bloc ends on Dec. 31.

The pound, which had started the day slightly up against a weaker dollar, fell on the news that the EU and UK were still far apart.

At 1014 GMT, sterling was down 0.6% versus the dollar at $1.2843 GBP=D3. It was also down around 0.6% versus the euro at 91.4 pence per euro EURGBP=D3.

A gauge of sterling overnight volatility rose to its highest since March GBPONO=FN.

“It’s challenged the prevailing market consensus that had been built up over the last couple of weeks, rightly or wrongly, that they were getting closer to a deal,” said Timothy Graf, head of macro strategy for EMEA at State Street Global Markets.

Graf said the chance of a deal not being reached is around 50%, and that this risk is not fully priced into the pound.

Speculators do not have a net short position on the pound, weekly futures data for the week to Sept. 22 shows 1096742NNET.

The EU on Thursday launched a legal case against Britain over its new Internal Market

…