Sterling steady as investors focus on Brexit impasse over N. Ireland

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LONDON, Nov 15 (Businesshala) – The pound was steady in early trade on Monday, lagging behind other risk-averse currencies, as investors focused on talks over a post-Brexit trading arrangement for Northern Ireland, set for later in the week. I was before the market figures.

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Relations between Brussels and London have deteriorated in recent weeks, with Britain unhappy with the Brexit deal in 2020 threatening to trigger an emergency clause known as Article 16 of the Northern Ireland Protocol, potentially threatening a trade war. was headed towards

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The European Commission’s Maros Sefkovic said Britain and the European Union would intensify their efforts to end the impasse this week.

Analysts were divided on how much Brexit tensions are having an impact on the pound.

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At 0852 GMT, the pound was flat against the dollar for the day, at $1.341, lagging other major currencies that were benefiting from a more broad-based “risk-on” mood in the FX markets.

Versus the euro, it was also flat, at 85.325 pence per euro.

Weekly CFTC positioning data shows that speculators are bullish on the pound versus the dollar overall, and that in the week to November 9 this net long position size remained close to a week ago.

ING Strategists wrote, “The FX market has still been fairly reluctant to price in any Brexit-related risk premium over the GBP, despite several indications that the EU is planning retaliation if the UK goes against the NIP (Northern Ireland Protocol). suspends some parts.” A note to customers.

“Our moderate bullish bias on GBP for the rest of the year is tied to the view that markets will continue to shy away from embedding more political risk in GBP.”

But a one-month risk reversal – a gauge of market expectations for the pound’s direction – hit the lowest level since December 2020 on Thursday last week. The gauge is in negative territory which indicates that the market expects the pound to fall.

Marshall Gittler, Head of Investment Research at BDSwiss Group, said: “The steadily declining level of reversal suggests that the market is becoming increasingly concerned about the pound, which I suspect may have had its effect from the UK bricksmanship around Article 16.” Something has to do with it.” In the client note.

In the coming week, markets will be focused on the UK jobs report on Tuesday and CPI data on Wednesday.

Surprisingly high US inflation data pushed the dollar to a 16-month high last week, prompting traders to place their bets on a hike in US rates by mid-2022.

The Bank of England will be the first major central bank to raise interest rates, but whether that initial hike comes as soon as next month or if it waits until early next year, economists polled by Businesshala are divided. has been done.

Reporting by Elizabeth Hawkroft; Editing by Angus McSwan

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