LONDON, Sept 30 — Sterling inched higher today after a week of hefty losses, showing little reaction to data showing a quarterly contraction in the UK economy as the focus remained squarely on Brexit news from the ruling Conservatives’ annual party conference.
The currency traded just off three-week lows against the dollar hit on Friday, when a senior Bank of England policymaker said “prolonged high Brexit uncertainty” could warrant looser monetary policy if global growth stayed disappointing.
By 0840 GMT the pound was up 0.2 per cent at US$1.2310 (RM5.16), having fallen 1.6 per cent last week and hitting a low of US$1.2270. Versus the euro too, it firmed 0.2 per cent, staying just off two-week lows touched on Friday.
Data showed the British economy contracted at a 0.2 per cent quarterly rate, a hangover from a stockpiling boom before the original Brexit deadline that was postponed until October 31.
But the economy grew by 1.3 per cent in the year to the end of June, revised up from an earlier estimate of 1.2 per cent.
The currency and other British assets did not immediately react to the data, given there is little sign of any progress in breaking the Brexit deadlock over securing an exit deal with the European Union.
Prime Minister Boris Johnson reiterated his pledge to deliver Brexit by October 31, with or without a deal while Arlene Foster, the leader of Northern Ireland’s Democratic Unionist Party (DUP), an ally of Johnson’s Conservative Party, said she could not accept any deal that treated the province differently from the rest of the United Kingdom.
The government’s unchanged stance on gunning for an October 31 Brexit has defused some of the optimism that boosted markets immediately after last Tuesday’s Supreme Court ruling that Johnson had acted unlawfully in suspending parliament.
Analysts at NatWest markets said the ruling just made early elections even more likely.
“Market excitement about an imminent deal always seemed a little optimistic, and the FX team has opted to sell sterling again,” they told clients.
Implied volatility, a measure of expected swings in an asset’s price, have started ticking higher again, with the one-month sterling/dollar contract which envelopes the scheduled October 31 Brexit date, rising to a one-week high around 11.7 vols.
However, despite the gloom on the British political and economic front, speculators trimmed net sterling short positions the latest week, data from the US Commodity Futures Trading Commission showed. — Reuters
