News World Sterling at highest since December 2019 versus weaker dollar

Sterling at highest since December 2019 versus weaker dollar

The pound hit 8-month highs versus the dollar on Tuesday, driven by weakness in the U.S. currency, but analysts were cautious about the outlook for sterling as a new round of Brexit talks began, with euro-sterling still firmly above 90 pence per euro.

The dollar index hit new two-year lows on Tuesday, facing the triple woes of diminishing yields, weak U.S. economic data and decreasing demand for safe havens.

Meanwhile, traders are braced for renewed sterling volatility as talks between Britain and the European Union restarted.

“Sterling’s recent good performance and resilience to grim economic data has likely relied on the Brexit story being put on the backburner by investors,” wrote ING strategists Chris Turner, Francesco Pesole and Petr Krpata.

“We see a non-negligible risk of markets starting to price back in a no-deal outcome,” they added.

Britain left the EU in January and is in a transition period during which the country remains in the bloc’s single market and customs union. The transition period will finish at the end of 2020 whether or not a trade deal has been reached.

At 1435 GMT, the pound was at $1.3220, up 0.9% since New York’s close. As the dollar weakened sterling hit $1.3276, its strongest since the last day of 2019.

Versus the euro, it was up around 0.3% but still above the key 90 pence per euro level, at 90.3.

Analysts say the impact of dollar weakness on the pound-dollar pairing masks sterling’s true weakness, with the effect of Brexit-related headlines more likely to be visible in euro-sterling.

But euro-sterling has been stuck in a narrow range: after monthly moves of more than 2% in February, March, April and May, the monthly change was less than 1% in June and July.

The options market suggests investor nervousness, with risk reversals, the difference between call and put option demand, showing investors still prefer options to sell the pound – although less than in March .

Prime Minister Boris Johnson’s spokesman said on Monday that Britain still believes a deal can be reached in September.

The trade negotiations are scheduled for up to Oct. 2, less than a fortnight before an EU summit. The EU has said negotiators must seal any deal by October to allow for ratification by the bloc’s 27 nations.

Jefferies analysts wrote in a note to clients that an improving net savings balance, possible good news on Brexit and the Bank of England’s quantitative easing could help the pound.

(Reuters)

Top Stories

Hardalias: State mechanism on full alert, Medicane in progress

The next six to nine hours will be crucial for the Ionian islands, currently in the grip of Mediterranean hurricane 'Ianos', while a new...

Athalassa Psychiatric Hospital admissions up by 25% this year

Athalassa Psychiatric Hospital admissions increased by 25% in 2020 compared to last year and this means that demand for additional available space is now...

Some 3.5 million face masks used in public sector in four months

Some 3,500,000 face masks have been distributed to staff members of the public and semi-governmental sector in Cyprus over the past four months, according...

Paphos police looking for missing 62-year-old Briton (PHOTOS)

Police said 62-year-old British national Glyn Christopher Oliver, who lives permanently in Paphos, is missing from his home since Tuesday and anyone with information...

France’s Beaune in Cyprus for talks on Eastern Med crisis-UPDATED

The EU should show its solidarity and be prepared to sanction Turkey over its unacceptable actions in the Eastern Mediterranean, French Minister of European...

Taste

Swordfish with aubergines

To toast the sesame seeds: place sesame seeds in a small non-stick frying pan over low heat and stir until you begin to smell...

Chicken with okra and bulgur wheat

Heat the oil in a pan and sauté the okra until golden. Remove the okra, lay out in an oven tray and sprinkle with...

Ravioli

Just a little before serving, heat the broth and add the ravioli. (If the ravioli is frozen you don’t have to defrost). Heat them...

Seafood kebab with avocado salad

Place the mussels, shrimps and salmon in a bowl together with tarragon and lemon zest. Season and cover, keeping in the fridge for 15...