Traders optimistic on sterling despite fall amid UK political worries

MARKET SPECULATORS are likely to keep their sterling positions steady this month, according to respondents in a Reuters poll which predicted the currency will trade around where it is now against the euro and dollar in a year’s time.

Sterling was hammered after Britain’s decision to leave the European Union and is around 13 per cent weaker against the dollar since the June 2016 referendum.

The currency made its steepest monthly gains in two years in September, buoyed by speculation the Bank of England will hike interest rates next month and after Brexit secretary David Davis said “considerable progress” had been made in EU divorce talks.

But this month, sterling has slipped after a string of data showed the British economy struggling to gain momentum, at odds with the BoE’s more rosy outlook, and as traders took profits from September’s rally.

At its November meeting the BoE is likely to raise interest rates for the first time in a decade, which is likely to support sterling in the near term.

Sterling positioning is likely to be similar at the end of the month to what it is now, according to 11 of 29 respondents in the poll.

Asmara Jamaleh at Intesa Sanpaolo said: “For any major change, some bigger progress in Brexit talks is needed.”

Sterling took a tumble yesterday as reports of a Tory plot to topple Theresa May cast fresh doubt over her future.

The UK currency reached a one-month low against the US dollar as MP Grant Shapps was unmasked as a ringleader pushing for a leadership election. The pound was 0.4 per cent lower versus the greenback at 1.307 and was slipping to a three-week low against the euro, falling 0.2 per cent to 1.117.

Connor Campbell, financial analyst at Spreadex, said a Tory leadership battle would be “seriously bruising for the pound” adding: “While on Thursday there was a web of reasons why the pound was driven lower, this Friday’s decline seems to have a more singular reason behind it: Tory infighting. The sound of sharpening knives has only grown louder since Theresa May’s

speech midweek.”