Sterling slips below $1.24, Brexit key summer risk

Sterling fell against the dollar and euro on Friday, with doubts about whether Britain will seal a trade pact with the European Union set to be the biggest weight on the currency over the summer months. Although the British economy is being gradually reopened after its coronavirus lockdown triggered a record slump, analysts said Brexit was still the biggest factor affecting the pound four years after the country voted to leave the EU.


Reuters | Updated: 26-06-2020 17:20 IST | Created: 26-06-2020 17:20 IST
Sterling slips below $1.24, Brexit key summer risk

Sterling fell against the dollar and euro on Friday, with doubts about whether Britain will seal a trade pact with the European Union set to be the biggest weight on the currency over the summer months.

Although the British economy is being gradually reopened after its coronavirus lockdown triggered a record slump, analysts said Brexit was still the biggest factor affecting the pound four years after the country voted to leave the EU. Little progress has been made in agreeing Britain's future trading relationship with the bloc.

Against that backdrop, ING chief EMEA strategist Petr Krpata said he expects sterling to fall further over the summer, touching 92.00 versus the euro. The pound was down around 0.2% against the euro at 1144 GMT at 90.53 pence, having hit three-month lows against the single currency on Tuesday.

Versus the dollar, it was down around 0.3% on the day at $1.2390, recovering a little after it touched $1.2377 at 0950 GMT. Sterling showed one of the worst monthly performance among major currencies in June, as it recovered 0.5% versus the dollar month-to-date, but lagged the broader market.

"The story is almost the same since the Brexit referendum, Brexit is a massive hurdle on sterling prospects," ING's Krpata said. After EU negotiator Michel Barnier highlighted the dim outlook for a breakthrough in Brexit talks on Wednesday, comments on Thursday from his British counterpart, David Frost, injected no new optimism.

"Given the uncertainty ahead, it means limited upside potential for sterling because until we have the clarity on the UK-EU trade deal and we know more details, money markets are unlikely to price out the probability of negative rates," he added. Money markets ramped up expectations of negative interest rates in the United Kingdom as policymakers debate further steps to support the struggling economy.

Investors have also been cautious over fears of a second wave of coronavirus infections as British Prime Minister Boris Johnson announced on Tuesday a significant easing of the lockdown in England, saying pubs, restaurants and bars can reopen from July 4. (Editing by Toby Chopra)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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