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Brexit uncertainty keeps sterling close to one-month lows
December 20, 2016 / 10:34 AM / a year ago

Brexit uncertainty keeps sterling close to one-month lows

* Graphic: sterling and gilt yields

* Graphic: World FX rates in 2016

By Abhinav Ramnarayan

LONDON, Dec 20 (Reuters) - Sterling dipped close to one-month lows against a broadly stronger dollar on Tuesday, kept under pressure by uncertainty over the process by which Britain will leave the European Union.

The pound fell 0.9 percent against the dollar on Monday on the back of concerns over how UK businesses will manage the exit from the EU, as well as what was perceived as a rising risk of a second Scottish independence referendum.

British Prime Minister Theresa May said on Monday the country could cover EU funding when it leaves the bloc, helping to ease pressure on the pound, as worries over a “hard Brexit” in which Britain loses access to the single market were alleviated a touch.

Traders will be listening to what May has to say when she is questioned by a parliamentary committee at 1400 GMT on her plans for Brexit.

They will also be watching Scottish First Minister Nicola Sturgeon, who is due to lay out plans for Scotland to keep closer ties to the EU after the split.

Sterling edged down 0.1 percent to $1.2379 in early trades, leaving it close to one month lows of $1.2355 touched the previous day.

It was flat against the euro at 83.90 pence, close to a five-month high of 83.05 pence touched earlier in the month.

“Brexit is still the major driver in sterling, so May’s comments today are a factor and there’s also a bit of a Scottish flavour to the day,” Rabobank currency strategist Jane Foley siad.

The losses were contained after May said on Monday the country could cover EU funding when it leaves the bloc.

Analysts were not expecting the prime minister to add significantly to those comments during her appearance before House of Commons Liaison Committee but warned that any surprises had the power to move markets.

“Her comments have the potential to be market-moving for the pound, which remains very sensitive to Brexit developments,” MUFG analysts said in a note.

Sturgeon is expected to announce proposals for how Scotland can remain in the European Union’s single market after Britain leaves the bloc.

“It hasn’t gained much attention so far, and it is true it is difficult to have a different deal for Scotland and the rest of Britain, but May has said she will listen to what Sturgeon has to say,” said Foley.

Brexit has fed concerns over the prospect of another independence referendum in Scotland, which strongly backed EU membership in June’s Brexit vote. (Editing by Alison Williams)

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