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Sterling hovers above 3-day lows as Brexit caution dominates

LONDON: Sterling held above a three-day low on Thursday as investors remained sidelined awaiting another round of Br

Dec 27 2018

LONDON: Sterling held above a three-day low on Thursday as investors remained sidelined awaiting another round of Brexit developments, as a broadly weaker dollar offered some support to the struggling British currency.

Against the dollar, the pound was broadly steady at $1.2635 after climbing as much as 0.2 percent to $1.2665 in the Asian session. Versus the euro, the pound was down 0.4 percent at 90.14 pence.

"There are a lot of cross-currents in the market today with the dollar struggling to gain momentum and other currencies awaiting major developments," said Manuel Oliveri, a currency strategist at Credit Agricole in London.

Prime Minister Theresa May will try to convince lawmakers to back her Brexit withdrawal arrangement next month, and then seek parliamentary approval for her deal in what could be a make-or-break moment in her struggle to avoid a disorderly exit from the European Union in March.

Should May fail to get her deal with Brussels approved, supporters of Britain remaining in the EU hope that it could lead to a second referendum.

The pound has performed well against the dollar after hitting 20-month lows on Dec. 14, last week enjoying its best weekly performance since November, but any turn in sentiment still appears elusive.

Overall short positions against the pound showed another increase with total bets rising to $4.8 billion in the week ending Dec. 21, according to futures data, after a brief drop earlier this month.

So far in 2018 sterling has shed more than six percent as investors worry Britain is headed for a disruptive divorce from its biggest trading partner.

Traders have also pushed back their expectations for the Bank of England to tighten monetary policy, worsening the yield disadvantage for holders of the pound rather than the dollar.

The dollar struggled to gain momentum after an overnight surge, declining a quarter of a percent against a basket of its rivals.

Copyright Reuters, 2018