Sterling headed for worst week since after December election

The pound was headed for its worst week since the British election as investors priced in the risk of Britain not being able to agree on a trade deal with the European Union in the 11 months left of the Brexit transition period.

Prime Minister Boris Johnson has said Britain will not obey the bloc's regulations, setting a hard stance on the upcoming negotiations. Some analysts say this gives Britain a weaker position against its biggest export market. Investors are nervous that Johnson is taking a hard line in the trade talks with the EU, which need to be concluded before the end of the year to avoid a potentially disruptive break in trading relations.

The pound was last flat at $1.2933, close to its lowest level in weeks. Against the euro, which has been dragged down by a stronger dollar, sterling traded higher by 0.2% at 84.78 pence. Still, the British currency was on course for its worst week since December, both against the euro and the dollar.

"I expect that the post-Brexit trade negotiations will continue to weigh on Britain, a country with one of the largest current account deficits in the world," said Marshall Gittler, head of investment research for BDSwiss Group.