The pound fell a fourth day as U.K. Chancellor Philip Hammond called on the European Union to signal what future trade relationship it wants amid signs that Brexit uncertainty helped prompt a “seismic drop” in London finance job vacancies.
Sterling has weakened versus most of its Group-of-10 peers this week, weighed down by weak economic data and continued signs of divisions between the two sides in the Brexit talks. It touched a two-week low versus the greenback after recruitment firm Morgan McKinley said an annual 37 percent decline in job openings in December underscored the looming “Brexodus” from the City of London.
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Market reluctance to be long sterling ahead of Brexit trade talks “could be behind this week’s softer tone,” said Jane Foley, head of currency strategy at Rabobank. “The remarks from Barnier this week on the inclusion of financial services in a trade deal are not encouraging and this could be a contributing factor to the more jittery pound.”
EU chief negotiator Michel Barnier maintains that only limited access to EU markets will be possible, while the U.K. continues to call for equivalence for financial services after Brexit. Companies have voiced concern at the lack of progress on a post-Brexit trade deal and Hammond said that many feel the U.K. has “little, if any” sign of what kind of agreement the EU wants.
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The pound fell 0.1 percent to $1.3494, taking its weekly decline to 0.6 percent. It weakened 0.1 percent to 88.53 pence per euro, while the yield on U.K. 10-year government bonds fell three basis points to 1.26 percent.
Data from the CFTC show that non-commercial futures are currently net long on the pound, by 16,235 contracts. This could limit further pound gains, according to Neil Mellor, a currency strategist at BNY Mellon.
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“The pound didn’t really get where it’s been trading on its own steam,” said Mellor. “I would be more confident of a large snap back if the market had built a large long position, which is not the case.”
Sterling gained almost 10 percent against the dollar in 2017 but some analysts are now saying the currency’s strength has reached its peak. The median in a Bloomberg survey sees the pound holding close to current levels at $1.35 by year-end.
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