LONDON: Sterling fell from five-month highs against the euro and dollar on Wednesday, with talks to secure a Brexit deal expected to go down to the wire before an European Union summit.
British and EU officials were to resume talks on Wednesday, a few hours after late-night negotiations wound up, but it was far from clear they would reach an agreement before the summit on Thursday.
A report on Tuesday negotiators were closing in on a draft Brexit deal sparked a surge by the pound and raised hope across world markets that a significant source of uncertainty would be removed. But the pound weakened on Wednesday as note of scepticism appeared to return.
Sterling was down 0.7 per cent at $1.2702, after gaining 1.5 per cent to a five-month high of $1.28 on Tuesday. Against the euro, the pound was almost 0.7 per cent weaker at 86.88 pence — also off five-month highs from the day before.
“There is a sense that we are moving towards a deal and the market is covering its shorts and justifiably so,” said Neil Mellor, senior currency analyst at BNY Mellon, referring to investor bets on sterling weakness. “But I would be cautious in chasing sterling higher, especially against the euro.” Trading in sterling options suggested high volatility in the currency was likely one way or another. — Reuters
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