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UPDATE 1-Sterling slips as dollar weakness fades; Brexit talks weigh

Tue, 28th Jul 2020 12:47

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Adds comment.)

July 28 (Reuters) - Sterling retreated from a four-month
high on Tuesday as a broad U.S. dollar rout over the past week
ran out of steam and negative news from Brexit negotiations
prompted hedge funds to take profits.

The pound slipped 0.02% lower versus the dollar at $1.2878
after rising to its highest level since March at
$1.2977 in early Asian trading. It was little changed against
the euro at 91.14 pence.

"We just have a bit of a pullback," said Gavin Friend at
National Bank of Australia. "Sterling has been a reluctant riser
against the weaker dollar and I think until we get some sort of
clarity on the EU-UK trade situation, sterling is going to
remain like that."

Concerns about the lack of progress of Brexit negotiations
also prevented the pound from pushing above the $1.30 levels.

The European Union says a deal needs to be done by October
to allow time for ratification by the end of the year. Both
sides have said the talks may be stalling. Michel Barnier, the
EU's chief Brexit negotiator, said a trade deal with the UK was
possible, sources told Reuters on Monday.

"Looking at the various comments from Barnier, markets are
pricing in more uncertainty," said Pesole. "They were probably
hoping to get something a bit more tangible on the EU-UK trade
negotiations."

That uncertainty was reflected in the currency derivative
markets. Sterling/dollar implied volatility, a gauge of expected
swings embedded in currency options, rose to a one-month high
around 8.3%, boosted by the dollar's plunge this
week.

(Reporting by Maiya Keidan; editing by Saikat Chatterjee,
Raissa Kasolowsky, Larry King)

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