LONDON (Reuters) - Sterling skidded to a 10-day low against a broadly stronger dollar on Monday with sentiment still sour after Friday’s speech by Prime Minister Theresa May failed to offer the details on Brexit that investors had been looking for.
Data released late on Friday showed speculators had cut their bets against the pound to the lowest level in almost two years in the week to last Tuesday after the Bank of England signalled it would raise interest rates from record lows in the “coming months”. [IMM/FX]
But the pound slipped on Friday, putting in its joint-weakest performance against the euro in seven weeks on Friday, with investors disappointed by the lack of detail on how Britain would ensure that it kept preferential access to the EU’s single market after it leaves the bloc.
It added to its losses against the dollar on Monday, falling as much as half a percent to $1.3432, its lowest since September 15.
“Sentiment is still slightly negative after Theresa May’s speech,” said ING currency strategist Viraj Patel.
“Markets had got a bit ahead of themselves last week, hoping that there would be some big groundbreaking Brexit speech... The speech didn’t actually guarantee that a transition deal is going to happen,” he said.
Patel added, however, that sterling’s price moves were largely the product of moves in the dollar and the euro on Monday.
The European Union’s chief negotiator Michel Barnier on Monday said Britain, which asked on Friday for a two-year transition period after it leaves the bloc in 2019, would have to abide by all EU rules during this phase.
The pound strengthened as much as 0.9 percent to 87.755 pence per euro, as investors priced political risk into the single currency after the German election results, which showed a surge in support for the far right and put the country on course for what could be months of coalition talks.
Investors are also focused on looming economic data releases, such as Wednesday’s GDP numbers, to see whether bets on a Bank of England rate increase in November are justified.
“Incoming data needs to remain robust to prevent rate disappointment going forward,” said Julius Baer economist David Alexander Meier. “Progress in the Brexit talks would (also) help.”
Reporting by Jemima Kelly; Editing by Jeremy Gaunt