Pound heads for sixth week of losses against the euro

Pound Sterling notes and change are seen inside a cash register in a coffee shop in Manchester, Britain, September 21, 2018. — Reuters pic
Pound Sterling notes and change are seen inside a cash register in a coffee shop in Manchester, Britain, September 21, 2018. — Reuters pic

LONDON, June 14 — The British pound fell again today as investors trimmed their positions after Brexiteer Boris Johnson moved closer to becoming the next prime minister, with sterling on track for its sixth week of losses versus the euro.

Sterling has fallen in recent weeks as the contest to succeed Prime Minister Theresa May heats up.

Investors are concerned that May’s successor will lead Britain out of the European Union with no deal in place on their future trading relations.

They are also worried about how little time whoever takes over will have to try to renegotiate May’s withdrawal agreement with Brussels. The EU says the deal is not up for renegotiation before Britain is scheduled to exit on Oct. 31.

Johnson, the face of the official Brexit campaign in the 2016 referendum, yesterday won by far the largest number of votes in the first round of the Conservative party leadership contest. Betting markets give Johnson a 70 per cent probability of winning.

The new prime minister should be chosen by the end of July. The seven remaining candidates to lead the Conservatives will be whittled down to two by lawmakers before a postal ballot of the wider party membership is held to select the new leader.

The pound slipped 0.2% against the euro to 89.115 pence , putting it on track for its sixth consecutive week of losses against the euro, its longest losing streak of the year. On Tuesday sterling hit a five-month low of 89.325 pence per euro.

Versus the dollar the pound slipped 0.4 per cent to $1.2616 , with most of the losses following the release of US retail sales data that triggered some buying of the greenback.

Some think sterling’s selloff has gone too far.

“Recent sterling weakness has been overdone, in our view, because markets are pricing in too high a risk of a no-deal Brexit in October,” UBS wealth management said in a note.

UBS said “lingering uncertainty” should keep the pound between 84 pence and 90 pence, with buying and selling opportunities when the currency nears the edges of that range.

It retained its three-, six- and 12-month euro/sterling forecasts at 87 pence per euro.

Nomura analyst Jordan Rochester said he is taking profits on a short position on the pound.

“It’s because all the negatives are known: GBP rallying on the smallest of non-events makes us wonder what would happen if we had some “positive” news. We would likely suffer from a position squeeze that for now we don’t want to be a part of,” he wrote. — Reuters

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