LONDON – Sterling fell around a quarter of a percent against the euro and underperformed gains for other major currencies against the dollar on Thursday as nerves around Brexit and the strength of the UK economy weighed on prices.
The pound – down by around a fifth in just over a year against the dollar – has been stuck in a 3-cent range for a month, absent dramatic developments in the government’s move towards launching Brexit talks next month.
There have been negative signs from a handful of economic data, with wages numbers on Wednesday dipping below forecasts, but so far not enough to provoke another more aggressive round of pound selling.
“The market is clearly taking a breather before the next round of Brexit news,” said Jane Foley, a strategist with Rabobank in London.
“Once the talks start properly the full complexity of the situation will become a lot more obvious. Meanwhile, the market is getting further proof that real earnings are going to be significantly lower by the end of the year. Sterling will be up for a rocky ride at the very best.”
The pound was up 0.3 percent at $1.2490 in afternoon trade in London, compared to gains of around 0.6 percent for the euro and yen against the dollar. It dipped a quarter of a percent to 85.35 pence per euro.
Dealers said there had been resistance to more gains against the dollar at around $1.2520.
“It has really been technical trading today,” said one London-based broker. “Sterling hit resistance above $1.25 this morning and then came back but I guess that in part reflects how many people still prefer being short of the pound.”
A number of major banks have again called for sterling to fall below $1.20 as talks on Britain’s departure from the European trading bloc develop later this year.
Retail sales numbers due on Friday will provide the next clue to the broader strength of the UK economy, which has proved consistently more robust than expected in the face of Brexit nerves since last June.
Sales growth is expected at 3.4 percent year on year in January.
“The pound has done a great job holding up into Thursday, seemingly on the back of a market that does not want to get too aggressive with U.S. dollar long bets in the face of Trump protectionism and Trump uncertainty,” analysts from LMAX said.
“Data hasn’t exactly been supportive. Meanwhile, Brexit remains a big concern.” – Reuters
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