Sterling fell back to around $1.24 on Tuesday, with illiquid trading conditions helping the pound reverse around half of a 1 percent rise the previous day on the view that Brexit will be slower – and softer – than had been feared.<\/p>\n
The pound jumped above $1.25 on Monday after Prime Minister Theresa May pledged to address business concerns that Britain could fall off a “cliff edge” into uncertainty when it leaves the European Union, hinting at some form of a transitional agreement.<\/p>\n
But having initially built on those gains on Tuesday, touching a one-week high of $1.2514 in Asian trade, sterling slid steadily throughout Tuesday, trading at $1.2404 by 1535 GMT, down 0.7 percent on the day.<\/p>\n
Analysts said sterling’s current volatility was the result of thin liquidity and stretched positions against the pound, rather than any fundamental drivers.<\/p>\n
“Positioning will mean you get the odd bit of volatile price action – liquidity in the sterling\/dollar pair is very thin compared with normal,” HSBC currency strategist Dominic Bunning said.<\/p>\n
“Financial investors … are just not as active in the market and don’t want to be involved in sterling because of the political risk – they just almost think it’s not worth it.”<\/p>\n
May’s speech on Monday was the strongest signal yet that she might be open to a deal that would offer Britain time to forge a new trading relationship with the EU when formal divorce talks are concluded, probably in 2019.<\/p>\n
“If the government were to stick to a two-year deadline that would be unlikely to result in any kind of agreement, so that would be likely to lead to a really hard Brexit, so this transitional arrangement is positive,” said Societe Generale currency strategist Alvin Tan.<\/p>\n
<\/p>\n
Source: Reuters<\/p>\n","protected":false},"excerpt":{"rendered":"
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