UPDATE 1-Sterling rises from 11-month low; investors focus on Brexit and BoE

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(adds comment, throughout update)

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LONDON, Nov 15 (Businesshala) – The pound edged higher on Monday but lagged other risk-averse currencies as investors weighed in on a post-Brexit trading arrangement for Northern Ireland as well as a rate cut by the Bank of England. The conversation focused on the potential for growth. Month.

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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

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

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Analysts were divided over how much Brexit tensions were having an impact on the pound, which benefited from a “risk-on” mood in currency markets but lagged peers.

At 1242 GMT, the pound was up 0.2% versus $1.3436, up from an 11-month low of $1.3354 on Friday last week.

Versus the euro, it was flat, at 85.28 pence per euro.

“The FX market has still been quite reluctant to price in any Brexit-related risk premium over GBP,” ING Strategists wrote in a note to clients.

“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.”

The weekly CFTC positioning data suggests speculators are bullish on the pound versus the dollar as a whole.

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.

Neil Jones, head of FX sales at Mizuho, ​​said Brexit tensions were “a continuing headwind for Sterling”, but unless there was an obvious event like triggering Article 16, the move was “less than a gentle slow .. . Opposing the sharp move.”

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

The Bank of England will be the first major central bank to raise interest rates, but whether that initial increase comes next month or early next year, economists surveyed by Businesshala is divided.

Mizuho’s Jones said the pound was weakening as investors lowered expectations for a rate hike in December.

Reporting by Elizabeth Hawkroft; Editing by Angus McSwan and Chizu Nomiyama


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