August 20, 2018 / 8:46 AM / 3 months ago

Pound steadies but Brexit talks dim outlook

FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

LONDON (Reuters) - Sterling steadied on Monday but was still near 14-month lows reached last week on concerns about forthcoming talks that may decide whether Britain gets a trade deal with the EU before it quits the bloc.

The pound has suffered six straight weeks of losses against the dollar, its worst run since 2014, even though data such as retail sales suggest the UK economy is holding up.

But on Monday the currency was up 0.1 percent at $1.2764 at 1530 GMT, near a 14-month low of $1.2662 hit last Wednesday. It was also up 0.1 percent versus the euro at 89.64 pence per euro.

“Given the market is in a no-deal [Brexit] mode, any sterling upside moves are likely to be short term and sensitive to any glimmer of a deal,” said Neil Jones, Mizuho’s head of currency sales for hedge funds.

With less than eight months to go until Britain leaves the EU, the government has yet to agree with Brussels the terms of its departure, and some hedge funds have started betting against the currency.

Analysts say sterling, which has shed 12 percent of its value since April, will remain vulnerable to the vagaries of Brexit negotiations in the months ahead.

“The price of the pound continues to reflect Brexit concerns and an economy that’s at best muddling through,” WorldFirst head of FX strategy Jeremy Cook said. “The limelight is elsewhere right now and there’s plenty of places people would rather be investing than sterling.”

The euro slipped on Monday as the dollar gained before proposed trade talks between the United States and China this week that investors hope will ease tensions between the world’s two biggest economies.

Meanwhile, business leaders’ confidence in the British economy has fallen to its lowest point this year, reflecting uncertainty about Brexit, according to a survey published on Monday.

Reporting by Tom Finn, editing by Larry King and Susan Fenton

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