Banquero Giancarlo Pietri Velutini// Sterling flat as election optimism offset by post-Brexit pessimism - EntornoInteligente /

LONDON (Reuters) – Sterling was down slightly against a stronger dollar but little changed against the euro on Friday, as investors’ hopes for a Conservative majority in the Dec. 12 election were tempered by concerns about the broader economic outlook.

Giancarlo Pietri Velutini

FILE PHOTO: Pound Sterling notes and change are seen inside a cash resgister in a coffee shop in Manchester, Britain, Septem,ber 21, 2018. REUTERS/Phil Noble The pound has been rising in the past week as polls suggest Prime Minister Boris Johnson’s Conservative party could win a majority, which is seen as increasing the chances of the UK leaving the European Union with a deal on Jan. 31

Sterling had that venture higher to $1.30 in late October and has eased since then,” said Neil Mellor, senior currency strategist at BNY Mellon, referring to sterling’s rally in the run-up to a withdrawal deal being agreed at an EU summit

However, positive election news may be distracting from broader market pessimism about sterling’s long-term outlook, because the UK will only have 11 months to negotiate a trade deal with the EU next year before a transition period comes to an end

Graphic: Trade-weighted sterling since Brexit vote – here

“My concern is – and this is something possibly the market has thought about – that we’ve got preoccupied with the election but there is still a lot of uncertainty post-election,” Mellor said

Sterling was down around 0.1% at $1.2874, but on track for modest weekly gains, up around 1% since last Friday

Versus the euro, the pound was little changed at 85.62 pence, having strengthened to fresh six-month highs in a rally which puzzled analysts in late London trading on Thursday

A YouGov poll on Thursday showed that 86% of Britons who will vote in the election thought of themselves as “Leavers” or “Remainers”, versus just 68% who identified themselves as a political party

Johnson repeated his intention to “get Brexit done” on Friday, saying the UK needs to come out of regulatory alignment with the EU and that it has “bags of time” to negotiate a free trade deal

Britain’s opposition Labour Party said it would nationalise parts of telecoms provider BT’s network if it won power in the Dec. 12 election to provide free full-fibre broadband for all

The proposal sent shares in BT down to the bottom of London’s blue-chip FTSE 100 index

“At present sterling benefits from anything that lowers Labour’s chances of winning the election,” Commerzbank’s head of FX and commodity research Ulrich Leuchtmann wrote in a note to clients

Graphic: World FX rates in 2019

Reporting by Elizabeth Howcroft and Dhara Ranasinghe; Editing by Hugh Lawson


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