UPDATE 1-Sterling slightly lower, near 5-week lows

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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 (iterates, adds background, updates prices)

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Nov 9 (Businesshala) – The pound was slightly lower against the dollar and the euro on Tuesday was not far from last week’s five-week low, as expectations of a rate hike weighed on sentiment.

Sterling fell sharply last week after the Bank of England shocked the market by leaving interest rates unchanged.

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According to the National Institute of Economic and Social Research (NIESR), the UK economy risks stagnation and sticky inflation in the coming years due to supply-chain disruptions and headwinds from Brexit.

ING analysts expect more weak trade in the release of UK 3Q GDP data on Thursday. Still, he predicted “a broad $1.34-1.38 range would last through the year,” adding that “the speculative community did not have enough conviction to drive it below the September support levels.”

The pound fell 0.2% to 85.59 pence against the euro at 1500 GMT.

It was down 0.1% at $1.355 against the dollar on Friday, from a five-week low of $1.3425.

UniCredit analysts said sterling “needs to fully break above 1.36 (against the dollar) to convince the market to bounce back long before the mid-December BoE meeting.”

Markets are predicting a rate hike of around 50% in December, while before the BoE meeting, they had hiked two rates till the end of the year.

“What surprised us with BoE last week was the power of his overbearing tone. Not only because they did not hike, they were also indifferent about future hikes,” BofA analysts said in a research note.

He added that his “proprietary BoE mood indicator, based on natural language processing of BoE minutes and which we update here, supports our subjective impression. It’s back to at least hawkish since May.” “

A possible new dispute with Ireland and France about a post-Brexit trade deal put pressure on the pound.

British Brexit Minister David Frost and French European Affairs Minister Clement Beaune spoke on Tuesday about issues including fishing and post-Brexit trade and agreed to talk again this week.

Ireland said on Sunday that the British government was ready to unilaterally invoke emergency provisions in the Brexit deal governing Northern Ireland’s trading systems. (Reporting by Stefano Rebaudo; Editing by Barbara Lewis)


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