LONDON: Sterling rose against a broadly weaker dollar on Wednesday, but later pared some of its gains after British Prime Minister Boris Johnson signalled intransigence in Brexit trade talks as he headed to Brussels for dinner with the president of the European Commission. With only weeks to the end of the Brexit transition period, traders are hopeful that a face-to-face meeting between Johnson and Commission chief Ursula von der Leyen can break the deadlock.
Ahead of the meeting, Johnson warned the European Union must scrap demands that he said were unacceptable if there was to be a Brexit trade deal. Sterling couldn't hold on to the intraweek-high level, paring gains to 0.16% against the dollar in volatile trading to $1.3380 by 1631 GMT. Against the euro, the pound was 0.4% higher at 90.30 pence, after falling to a seven-week low on Monday.
During the day, a series of headlines speculating on the prospects of a Brexit deal hit the wires and contributed to the sterling volatility. In a week marked with high volatility, the British currency fell to a near three-week low on Monday as leaders failed to resolve their differences in the broader trade talks, raising concerns of a no-deal Brexit.
Britain formally left the EU in January, but remains in the bloc's single market and customs union until a transition period ends on Dec. 31. Failure to agree a post-Brexit trading deal would create chaos through supply chains, financial markets and borders.
After three days of losses, sterling on Wednesday hit its highest intraweek level, $1.3476, not too far from a 2-1/2 year high of above $1.35 touched last Friday.
In a sign that the latest markets moves were more of an indicator of panicky trading, overnight implied volatility gauges - a measure of expected price swings - rose to close to 25%, touching the highest point since late March.
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