Sterling stuck near recent lows, little to cheer ahead of Brexit vote

LONDON: The pound was stuck near four-month lows against the euro on Monday and while it extended its recent rebound versus the dollar, traders said the currency would struggle to make much headway before crucial Brexit developments in January.

Prime Minister Theresa May will try to convince lawmakers to back her Brexit withdrawal arrangement next month, and then seek parliamentary approval for her deal in what could be a make or break moment for the government’s battle to avoid a disorderly exit from the European Union in March.

Should May fail to get her deal with Brussels approved, supporters of Britain remaining in the EU hope that it could lead to a second Brexit referendum.

Britain’s opposition leader Jeremy Corbyn said on Saturday he would seek to renegotiate the terms but would nevertheless push ahead with Brexit if he were to win a snap election in 2019, in a blow to party supporters who want that second referendum.

With major Brexit developments on the immediate horizon, sterling has been treading water in recent sessions.

In quiet Monday trading before the holiday period, investors were not in the mood to move the currency much: The pound slipped slightly versus the euro but firmed marginally against the dollar.

Sterling has performed well against the US currency after hitting 20-month lows on Dec 14, last week enjoying its best weekly performance since November, but the gains mask any real turn in sentiment.

“We have seen a decent bounce in cable (sterling versus the dollar) but that’s more about dollar weakness than sterling strength,” said Alvin Tan, currencies analyst at Societe Generale.

Against the euro, the pound dropped 0.1 per cent to 90.030 pence.

Sterling hit a four-month low earlier this month, and while it had strengthened to below 87 pence briefly in November, its trading range has been narrow as investors avoid betting on whether Britain can resolve its Brexit uncertainty.

Against the dollar, the pound rose 0.2 per cent to US$1.2652 .

So far in 2018 sterling has shed 6.2 per cent as investors worry Britain is headed for a disruptive divorce from its biggest trading partner.

Traders have also pushed back their expectations for the Bank of England to tighten monetary policy, worsening the yield disadvantage for holders of the pound rather than the dollar.

Against the euro sterling is down 1.3 per cent in 2018, in what would be its third consecutive year of losses versus the single currency.