Sterling slipped back towards $1.30 on Friday, ending the week in much the same place as it started, with worries over Britain’s exit from the European Union keeping pressure on the currency.
The pound had jumped back over $1.31 on Thursday, after Bank of England policymaker Kristen Forbes said she saw no case for a further cut in interest rates, after the Bank slashed them to a record low of 0.25 percent last month.
But it slipped later in the day and continued to struggle on Friday, after British Foreign Secretary Boris Johnson said he expected the formal divorce proceedings between Britain and the EU to begin early next year, and that two years may not be needed to negotiate a deal.
Sterling hit a three-decade low below $1.28 in the wake of Britain’s shock Brexit vote but had climbed about 5 percent as of early September as data showed the economy holding up relatively well.
After parliament returned from its summer recess, however, bringing Brexit back into the headlines, worries about the fallout have weighed on sentiment and the currency alike.
“What we’ve always said is that with no news on Brexit, sterling is able to recover somewhat, but the uncertainties are still there,” said Commerzbank currency strategist Esther Reichelt. “We’ll have to see whether the economy maintains this positive sentiment when we’re proceeding with Brexit.”
Reichelt added, however, that some hard facts – rather than worries or uncertainties – would be needed in order to justify a break below July’s $1.2798 low.
Sterling fell 0.6 percent on Friday to $1.3005, leaving it flat on the week. It also slipped 0.6 percent to 86.17 pence per euro, 0.3 percent weaker than at the start of the week.
“It almost feels like (sterling) is finding an even tighter trading range in what is an already tight trading range,” said Western Union’s head of corporate treasury sales, Tobias Davis. (Editing by Hugh Lawson)