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Sterling opens higher as UK, EU continue Brexit talks

  • Significant issues remain between Britain and the EU Union about their post-Brexit trade relationship, British housing minister Robert Jenrick said on Friday.
02 Oct 2020

LONDON: Sterling rose early on Friday before Britain's David Frost and the European Union's Michel Barnier meet to continue Brexit talks.

Significant issues remain between Britain and the EU Union about their post-Brexit trade relationship, British housing minister Robert Jenrick said on Friday.

A more important meeting is set for Saturday, when British Prime Minister Boris Johnson will meet with European Commission President Ursula von der Leyen to discuss the next steps.

"This meeting is what sterling longs needed," said Jordan Rochester, forex strategist at Nomura. He expects sterling to continue rising because the risk-reward getting a deal over no-deal.

Still, the pound is unlikely to strengthen by much until it becomes clear in which direction the talks are headed, he said.

"With each (Brexit news) headline you get sucked in to put trades on and within minutes a denial comes in and it turns either way."

The pound had a tumultuous day on Thursday, rising and falling in direct response to Brexit-related news, as Britain and the EU neared the end of the last scheduled round of trade talks before the bloc's leaders assess progress on Oct. 15-16.

Rochester has been advising not to trade sterling unless they have to.

The pound was last trading up 0.4% versus the euro at 90.78 pence and up by 0.2% against the US dollar at $1.2914.

Sterling overnight volatility gauges receded however. The cost for options on a three-month contract for protection against volatility also fell to a one-month low.

Britain is struggling with a coronavirus-induced economic recession, another headache in addition to Brexit.

The events industry warned Johnson on Friday that more than 90,000 people in the exhibitions business would be made redundant in the coming weeks unless he offered more support to replace a government job-furlough scheme.

More British companies reported a fall in sales over the past three months than an upswing, despite the lifting of lockdown restrictions for most parts of the economy, the British Chambers of Commerce (BCC) said on Thursday.

However, Britain on Thursday reported 6,914 new COVID-19 cases, a decline from the previous two days, when more than 7,000 cases were reported daily.