* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
LONDON, Jan 31 (Reuters) – The British pound extended its
rally on Friday and was on track for its biggest weekly gain in
a month after the Bank of England’s decision to keep interest
rates steady on signs of a post-election pick-up in growth.
But analysts said the rally may be short lived. The United
Kingdom exits the European Union at 2300 GMT and faces
negotiations on reaching a new trade and future relationship
deal with the bloc by the end of 2020 – something the EU has
said will not be easy. [nL8N2A01DM]
“Looking ahead, there are more downside risks to the pound
as investors gauge the progress of the Brexit negotiations,”
said Morten Lund, a strategist at Danske Bank who expects
euro/pound to rise to 86 pence over the coming months.
At the stroke of midnight in Brussels, the EU will lose 15%
of its economy, its biggest military spender and the world’s
international financial capital – London. Britain must begin
charting a course for generations to come.
But in the final countdown to Brexit, the pound was still
basking in the after glow of the Bank of England’s decision to
hold interest rates on Thursday at Governor Mark Carney’s final
policy meeting. [nL8N29Z4VJ]
Sterling gained 0.8% to as high as $1.3245 , its
highest level in eight days on Friday. Against the euro
, the British currency rose 0.2% to 83.88 pence.
On a weekly basis, the pound was on track for a second
consecutive week of gains against the dollar and its best weekly
performance since end December.
Risk reversals and implied volatility gauges for the pound
signaled calm over the next few months, with both indicators
holding near recent lows.
Analysts also attributed the pound’s strength to broad-based
(Reporting by Saikat Chatterjee; Editing by Timothy Heritage
and Andrew Heavens)
Reuters Messaging: firstname.lastname@example.org))
Keywords: BRITAIN STERLING/CLOSE
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.