The British Pound Sterling slumped against the dollar on Monday, January 8,as investors eyed a reshuffle of Britain’s cabinet, though most said that bar any major surprises, the changes would be unlikely to significantly move the pound.
Sterling has been trading between $1.30 and $1.36 since September, and traders say it will take major new developments in Brexit discussions – or a run of strong economic data that brings the timing of the next Bank of England interest rate hike forward – for the currency to break out of that range.
It inched down 0.3 percent to $1.3530 on Monday.
The Daily Telegraph reported May would create a new post to provide regular updates to the Cabinet on preparations for leaving the EU without a trade deal — an outcome the government says it wants to avoid, but is nevertheless drawing up contingency plans for.
UBS Wealth Management currency strategist Geoffrey Yu, in London, said such an appointment would be seen as moderately positive by markets as it would assuage concerns that the government is ill-prepared for a “no deal” scenario, but that he did not see the reshuffle affecting the pound materially.
“If the names bandied about materialise, the bulk of the news is already in the price. And by the sounds of it, the key ministries are going to remain as they are,” he said.
Positioning data on Friday showed speculators added to their bets on sterling strengthening in the week up to last Tuesday, but those positions are still only just in positive territory.
“If we get bad news or good news, markets are going to be in a holding pattern. It’s going to take a lot of good news – be it economic or political – to push positioning definitively towards the long or short side,” said Yu.
Against a broadly weaker euro, the pound edged up 0.1 percent to 88.61 pence.
Patel added that any sterling pullback towards $1.34 should be seen as a buying opportunity. The Dutch bank sees sterling trading at $1.40 by the end of the first quarter.
