Sterling dips to one-month low against euro as Brexit talks in focus

Varadkar and Johnson to meet for last-ditch talks with market priced for negative result

Sterling was softer against  a stronger euro. Photograph: iStock

Sterling was softer against a stronger euro. Photograph: iStock

 

Sterling dipped to a one-month low against a broadly stronger euro on Thursday, with investors focused on a high-stakes meeting between Leo Varadkar and Boris Johnson just three weeks before Britain is due to leave the European Union.

A flurry of British data, including gross domestic product and industrial production figures, had little impact on the pound, which has been driven primarily by politics as the scheduled Brexit date looms closer.

The Taoiseach will meet the UK prime minister in a last-ditch attempt to revive the British proposal for a Brexit deal that the European Union says is inadequate.

“Anything that keeps hopes of a deal alive into next week would lift the pound,” said Adam Cole, chief currency strategist at RBC Capital Markets, who thinks there is an 80 per cent chance of Brexit being delayed due to a deal not being reached before the October 31st deadline.

Mr Cole said the market was already priced for a negative conclusion to the meeting, although there may be a “small knee-jerk move lower” as residual hopes for a deal fade.

“If the meeting goes badly the market probably takes the probability of a deal close to zero. Then, realistically, we should start to focus on what the outcome of the highly likely election will be,” Mr Cole said.

Deal or no deal

Mr Johnson has said the UK will leave the EU on October 31st, deal or no deal, but the UK parliament has passed a law requiring him to request an extension if he fails to reach a divorce agreement. Any delay is expected to be followed by an early election.

Sterling rose 0.4 per cent against a broadly weak dollar, last trading at $1.2255, above one-month lows hit earlier this week just below $1.22.

Versus a stronger euro, sterling was a touch softer on the day at 90.04 pence, after touching a one-month low of 90.10 pence.

The pound also fell to a one-month low against a trade-weighted basket of currencies published by the Bank of England.