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Sterling Bounces Towards Six-week High Against Greenback

Sterling headed towards six-week highs against the greenback on Tuesday as investors continued to cut their short positions, even as the U.K. PM Boris Johnson stuck to his promise to take the U.K. out of the European Union by 31 October.

Experts said traders were proceeding to reverse their guesses against the currency as they cautioned about being caught on the wrong side should the pound further extend a rally it began last week.

A broader weaker greenback also supported the pound in shifting higher Tuesday.

Boris Johnson is required by a law passed this month to ask the EU for a three-month stay on Brexit if a divorce agreement is not approved by Oct. 19; however, British media reported that his team has ways to circumvent it. Johnson stated Monday Brexit would happen on Oct. 31, with or without a deal.

Britain’s supreme court has begun to hear the federal government’s argument that Johnson’s choice to suspend parliament until the Brexit date was not unlawful as Scottish judges ruled last week.

His opponent parties say the suspension was aimed at impeding parliament from stopping a no-deal Brexit, an accusation Johnson refuses.

The currency has firmed over 3% in August, its gains accelerating after parliament passed the law ruling out no-deal Brexit. It hikes 1.3% last Friday, grasping at a headline — later denied — that Johnson’s Northern Ireland allies might soften their Brexit stance.

Pound Monday hit a six-week high of $1.2515. The currency was struck by the volatile greenback, which surged late on Monday as oil prices eased and trade strains with Japan appeared to cool.

Traders are now bracing up for the U.S. Federal Reserve’s policy meeting this week.

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Sterling Rallies for Second Day as Brexit Without Deal Worries Retreat

The sterling rallied to a one-week high on Thursday after legislators voted to force PM Johnson to seek a three-month halt to Brexit if he failed to secure a divorce agreement with the European Union.

Political ambiguity remained high — Johnson renewed his efforts to seek an election next month after a first try was defeated Wednesday — however, market spectators were relieved that at least a no-deal Brexit seemed to be avoided.

The British currency advanced 0.4% to above $1.23, its highest since Aug. 28 and building on an overnight 1.4% hike, its steepest one-day jump since March.

Investors have ignored the pound in recent times as concern grew that Britain would crash out of the EU with no deal. On Monday, it dropped to below $1.20.

UBS analysts said a pause to Brexit until January 2020, and an election after October could drive the pound as high as $1.30, a four-month high.

The rally reverberated through the derivative markets as well. Two-month implied levity marks for pound options, which cover the Oct. 31 deadline for Brexit, fell. The slump in expected price swings for the pound indicated markets were loosening extreme short-period destructive bets.

Despite the rebound, the British currency remained over 8% below March’s 2019 highs of almost $1.34, on worries an election is the only method to break the political impasse.

“Nonetheless, with the outcomes from any election so hard to forecast and the problem of still fixing on a deal, we predict further pound rallies are likely to be limited until we have clarity on a result,” said John Marley, a senior FX consultant at FX risk management specialist.

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Sterling Drops to $1.21 As BoE Reduces Growth Estimates Before Brexit

Sterling dropped to a 30-month low on Thursday below $1.21, hurt by a stronger greenback, resumed worries about a no-deal Brexit and reduced Bank of England forecasts for British economic progress.

The pound declined to a low of 1.2085, its lowest since January 2017. It came after the U.S. Federal Reserve’s less dovish than expected policy meeting on Wednesday pushed greenback buying, and prior to the BoE kept rates of interest on hold; however, lowered its growth forecasts amid mounting Brexit dangers.

The pound shed over 4% of its value in July, its worst month since October 2016, following new Prime Minister Boris Johnson’s pledge to depart the European Union on Oct. 31 whether or not a transition settlement can be agreed with Brussels.

This triggered panic among traders that Britain was on track for a chaotic divorce after 46 years in the world’s largest trade bloc.

On the Bank of England’s trade-weighted index, which measured versus its trading partners’ currencies, the pound has declined to its lowest since early November 2016, having dropped over 7% since May.

The BoE kept rates on hold at 0.75% on Thursday; however, gave no hint it was contemplating paring interest rates like other central banks.

The pound was little influenced by the declaration, hovering around the $1.21 mark.

BoE Governor Mark Carney said “profound uncertainties” over the future of the world trading system, and Brexit were weighing on UK economic efficiency.

The BoE estimates assume Britain shuns a Brexit shock, but it nonetheless reduced its growth forecasts to 1.3% for 2019 and 2020, down from 1.5% and 1.6% respectively in its last projections in May.

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Sterling Dips Below $1.21 After Dollar Jump, BoE Cut to Growth Estimates

Sterling declined to a 30-month low on Thursday below $1.21, pressed by a stronger greenback, refilled worries about a no-deal Brexit and the Bank of England reducing its economic development estimates.

The pound declined to a low of 1.2085, its poorest since January 2017. It came after the U.S. Federal Reserve’s less dovish than expected policy meeting on Wednesday pushed dollar buying, and before the BoE kept rates of interest on hold; however, lower its growth estimates amid mounting Brexit risks.

Sterling was last down 0.4% at $1.2111, while versus the euro it was fixed at 91.055 pence EURGBP=D3.

The pound shed over 4% of its value in July, its weakest month since October 2016, following new Prime Minister Boris Johnson’s promise to exit the European Union on Oct. 31 whether or not a transformation deal can be agreed with Brussels.

This sparked fears among traders that Britain was on course for a disruptive divorce after 46 years in the world’s largest trade bloc.

The BoE kept rates on hold at 0.75% on Thursday; however, gave no sign it was contemplating lowering rates of interest like other central banks.

The pound was little shifted by the announcement, floating near the $1.21 mark. BoE Governor Mark Carney was to hold a press conference at 1130 GMT.

Money traders are pricing in a 25 basis point rate reduction by the BoE before March 2020.

On the Bank of England’s trade-weighted index, which ranks sterling against its trading partners’ currencies, the pound has declined to its lowest since early November 2016, having fallen over 7% since early May.

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Sterling Plunges to $1.22, Costs Rising Possibility of No-Deal Brexit

Sterling fell to 28-month lows on Monday and headed for its greatest daily dip versus the greenback since November as traders scrambled to factor in the risk of a no-deal Brexit and the possibility of a fastening election.

A still-deeper sink in sterling stays on the cards; all metrics show that a disorderly British exit from the European Union is far from being fully valued in.

While most traders have until now wager on a last-minute deal to avert a tough Brexit, that expectation is shrinking under new Prime Minister Boris Johnson.

Sterling losses quickened after it violated a critical psychological level of $1.23 and Johnson repeated that while he wanted to reach a brand new trade agreement with the EU, the UK would exit the bloc on Oct. 31 with or without a deal.

By 1600 GMT it was down 1.3% at $1.2229 after knocking $1.2213 earlier, its lowest since March 2017. Versus the euro, the pound reached 91.16 pence, its most decrepit since September 2017.

“All the stops are out, and the pound is now in free fall,” Neil Wilson, an analyst at online brokerage Markets.com, stated, adding the pound may drown to $1.21 if the $1.22 level was breached.

The British government mentioned Monday it assumed there would be a no-deal Brexit as a result of a “stubborn” EU was declining to renegotiate their divorce.

The 27 other EU representatives have repeatedly said the divorce settlement shouldn’t be up for discussion.

Adding to the pound’s works is the possibility of an early parliamentary election. The Conservative Party has surged in opinion polls since Johnson became chief, per YouGov, which confirmed support for the party at 31%, well above the opposition Labour Party.

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Sterling Afloat by Retail Sales, Bid to Prevent No-Offer Brexit

The pound bounced on Thursday after stronger-than-predicted retail sales numbers, additionally finding backing from a vote by legislators to make it harder for Britain’s subsequent prime minister to try to pressure a no-deal Brexit.

MPs approved the final wording of the plan, though an already sturdy sterling reacted a bit.

Boris Johnson, the favorite to succeed Prime Minister Theresa May, has stated Britain should leave the European Union by Oct. 31 with or without and has declined to rule out hanging parliament to prevent legislators from attempting to block his exit plan.

That has babbled traders who fear a government under Johnson would increase the risk of a no-deal Brexit, and this week they dropped sterling, which fell to a 27-month low against the greenback and a six-month low versus the euro.

However, on Thursday the currency rallied a few of those losses, with merchants who had bet against it taking some earnings.

Explaining sterling’s power, analysts further cited media reports which mentioned EU chief negotiator Michel Barnier was open to different border plans for Eire – a significant sticking level in Brexit agreements.

However, many count on turbulent times for sterling as the Brexit deadline nears.

Many economists have forecasted UK gross domestic product contracted in Q2; however, the sudden bounce of retail sales in June may increase hopes that the economic system kept rising.

The pound was up 0.4% at $1.2477, after growing to as high as $1.2494, a two-day high, and away from the 27-month low of $1.2382 hit on Wednesday.

Against the euro, sterling elevated 0.4% to 89.92 pence, hiding from a high of 89.795 earlier. It had struck a six-month low of 90.51 on Wednesday.

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Sterling Touches Two-Year Low as Traders Hedge Grow in Brexit Risk

Sterling declined below $1.24 on Wednesday, levels not plumbed for over two years, as traders continued to price the increasing risk of Britain’s crashing out of the European Union without a transition deal in place.

With economic data further displaying the UK economy coping, putting more strain on the Bank of England to ease fiscal policy, traders are taking to currency derivatives and futures markets to bet on more weakness.

After dropping to as low as $1.2382, the pound later bounced slightly on Wednesday to trade at $1.2426 GBP=D3, up 0.2% on the day; however, the currency stays under strain.

In October 2016, the British currency fell briefly below $1.15, its weakest in more than than 30 years, throughout a flash crash in the forex markets in early Asian trading sessions.

It has since regained, strengthening to nearly $1.34 earlier this year. However, fears the subsequent British Prime Minister will drag Britain out of the EU without a deal have prompted merchants to drop the pound in recent times.

Arch-Brexiteer Boris Johnson is the one to become Conservative Party chief subsequent week and thus the next prime minister. Johnson and his contestant for the leadership, Jeremy Hunt, have been competing with one another to show party members their readiness to force a “hard” Brexit.

The pound has lost 1% against the euro this month and over 2% against the greenback, putting it on track for its greatest month-to-month fall since June 2018.

It’s this year’s worst-performing G10 currency against the greenback. HSBC strategists said a “no-deal” would push the pound to $1.10.

Against the euro, sterling fell to as little as 90.51 pence EURGBP=D3 on Wednesday, a new six-month low, before regaining to 90.285 by 1445 GMT.