Sterling falls more against strong dollar, hurt by Brexit, weak outlook
LONDON, Sept 3- The pound fell against the dollar on Thursday, extending its losses on a combination of dollar strength and weak domestic factors: the long-term damage to Britain’s economy from the coronavirus and a lack of progress in Brexit negotiations. The Bank of England’s deputy governor, Dave Ramsden, said on Wednesday that the level of British economic…
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
LONDON, Sept 3 (Reuters) – The pound fell against the dollaron Thursday, extending its losses on a combination of dollarstrength and weak domestic factors: the long-term damage toBritain’s economy from the coronavirus and a lack of progress inBrexit negotiations.
The Bank of England’s deputy governor, Dave Ramsden, said onWednesday that the level of British economic output wouldpermanently be about 1.5 percentage points lower than it wouldbe had it not been for the pandemic.
The European Union’s chief Brexit negotiator, meanwhile,said that Britain had not changed its position on key stickingpoints in Brexit trade talks and that he was “worried anddisappointed”.
“Over the past few days Sterling was able to benefit from aEUR and USD weakness. At the same time investors seem to beignoring idiosyncratic factors,” wrote Commerzbank FX strategistThu Lan Nguyen in a note to clients.
“Things are still not looking great as far as Brexit isconcerned,” she said, referring specifically to comments by BoEgovernor Andrew Bailey about a lack of progress on the issue ofequivalence for the financial services sector.
“Following 4 years of Brexit drama the market seems immuneto this. However, GBP investors will be unable to ignore theBrexit risk forever,” Nguyen said.
At 0753 GMT, sterling was at $1.3295, down 0.4% since theprevious session’s New York close.
Against the euro it was little changed, down around 0.1% at0.8884.
After the euro hit $1.20 earlier this week, it has retreatedas the market grew concerned that euro strength was a problemfor the European Central Bank.
“EUR/GBP is pressing support at 0.8865, helped by theslightly softer EUR,” wrote ING strategists.
“Our preference is that this support level holds, beforefresh rounds of Brexit brinkmanship from both sides weighs onGBP over coming weeks,” they wrote, adding that they prefer amove back above 0.9 as neither side look willing to compromisein negotiations yet.
Britain’s economy shrank by more than 20% in the April-Juneperiod, worse than any other big industrialised nation.
More than one-in-10 British shops stand empty.
UK Prime Minister Boris Johnson said that the furloughscheme which helped retain jobs during the pandemic was nowkeeping people in “suspended animation” and that people shouldgo back to work.
On the possibility of a negative interest rate, speculationabout which has previously hurt the pound, BoE Governor AndrewBailey said that it is in the Bank’s box of tools but that he isnot planning to use it soon.(Reporting by Elizabeth Howcroft; Editing by Hugh Lawson)
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