Pound Set for Fourth Weekly Decline Versus Euro as Brexit Weighs
(Bloomberg) -- The pound headed for its fourth consecutive weekly decline against the euro as concerns over Brexit negotiations and tepid economic data weighed on the U.K. currency.
Sterling touched its weakest level versus Europe’s shared currency since October on Aug. 23. The pound has had a rocky week as Brexit papers released by the U.K. government did little to ease doubts on whether it was enough to convince the European Union to allow trade talks to start as soon as October. With the U.K. yet to clarify how much it will pay the EU as a Brexit bill, investors will closely scrutinize talks next week to gauge how smooth the negotiations will be.
- EUR/GBP little changed at 0.9220, having climbed to 0.9236 on Wednesday, its highest since Oct. 7
- The euro set for a 0.9% advance on the week
- Bears likely to stay absent until market comes closer to next meaningful resistance at 0.9415
- While sterling could face further political headwinds, analysts at ING Bank say it’s unlikely to weaken to parity with the euro
- The pound erased an earlier weekly decline against the dollar after Federal Reserve Chief Janet Yellen refrained from any hawkish policy comments in her Jackson Hole speech.
- GBP/USD climbs 0.6% to 1.2881, after falling to as low as 1.2794. The pound is set for a weekly advance of 0.1%
- Pair breaks through 1.2850-62 resistance, next at 1.2889-91, 100-DMA, 13-DMA
- Sterling faltered this week as stagnant investment and weak consumer spending figures signaled that the U.K. economy was fast losing steam
- Analysts at Commonwealth bank of Australia, including Elias Haddad, said that the Bank of England will be in no rush to raise rates given the slowing economy
- Also “as long as Brexit-related uncertainties persist, a lower GBP may be necessary to encourage greater foreign capital flows to the U.K. to finance the current-account deficit,” they write in a note to clients
- CBA recommends selling GBP/CAD at current levels (~1.6030) with a target of 1.4900 and a stop loss at 1.6400