UPDATE 1-Sterling consolidates near six-day highs vs dollar, euro

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* Graphic: World FX Rates in 2020 tmsnrt.rs/2egbfVh

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*Graphic: trade-weighted sterling since the Brexit vote tmsnrt.rs/2hwV9Hv (updates price, adds analyst comment)

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LONDON, Oct 4 (Businesshala) – Sterling consolidated near six-day highs against both the dollar and the euro on Monday, extending gains after recovering late last week to its lowest level since December 2020.

Rising inflation expectations early last week saw bond yields climbing higher and affected risk sentiment in equity markets, pushing sterling to $1.3412, its lowest level since December 2020. Sterling moves in line with global risk sentiment.

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The pound has recovered since the latter half of last week, reaching $1.3610 in afternoon trade in London on Monday, its highest since September 28. This leaves the currency slightly negative for the dollar in the year.

Sterling was one of the best performing G10 currencies against the dollar in the first half of 2021, fueled by global reflation trade and optimism over Britain’s vaccination programme. But the post-Brexit hangover has left Britain facing many problems from labor shortages in supply chains and disputes with the European Union over Northern Ireland.

Labor shortages after Brexit and the COVID-19 pandemic have thrown some sectors of the economy into disarray, disrupted fuel and medicine deliveries, and a shortage of slaughterhouse workers forced more than 100,000 pigs to face a well. have to do.

Britain’s Brexit Minister David Frost has prepared a proposal to permanently replace the Northern Ireland Protocol, a part of the Brexit divorce deal, and the government will make a decision by the end of next month, British newspapers have reported.

Ministers are also due to make a decision by the end of next month on whether to unilaterally postpone the Northern Ireland Brexit deal, The Times reports.

ING analysts Francesco Pesol and Chris Turner said in a morning note, “GBP has been volatile – caught behind surprisingly hawkish Bank of England and Brexit travels – particularly on the maritime border with Northern Ireland.”

Regarding the EU’s response to Britain’s proposals on Northern Ireland, Frost said at the Conservative Party conference in Manchester: “We cannot wait forever. Without an agreed solution soon, we will have to deal with the effects of the Protocol on Northern Ireland.” Article 16 will need to be acted upon by using safeguards to remove it.”

Against the euro, sterling remained largely unchanged at 85.61 pence per euro.

“Largely the consolidation of last week’s selloff, coupled with a return to broad risk appetite, helped lift riskier currencies such as the pound,” said Viraj Patel, FX and Global Macro Strategist at Vanda Research.

“We won’t read too much into the chancellor’s additional job support measures announced today – and there are still a myriad of headwinds,” Patel said, noting that supply disruptions and Brexit are significant headwinds for consumer confidence in the fourth quarter. . (Reporting by Rithvik Carvalho; Editing by Hugh Lawson)

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