Sterling bounce checked as Brexit, scandal in focus

European Stock Markets

The pound bounced on Monday after three consecutive weeks of losses, though signs of instability in Britain’s governing Conservative party and uncertainty around Brexit negotiations checked gains.

Following Thursday’s quarter percent interest rate rise by the Bank of England - its first in over a decade - investors have been watching closely for any developments that could affect the bank’s plans for further rate hikes.

 

Sterling was up 0.2 percent against the dollar on Monday at $1.3112, having fallen for three straight weeks. Against the euro, it was up 0.4 percent at 88.42 pence.

The central bank said last week it expected to raise rates just two more times over the next three years, an announcement that drove the biggest single-day loss for sterling since the week after the Brexit vote in June 2016.

Britain’s economy would grow more slowly in the short term if the country failed to secure a future trading deal with Europe, and that uncertainty over the progress of divorce talks was impeding British business.

Almost two in three British firms will have contingency plans in place by March for the possibility that Britain leaves the EU without a deal, the Confederation of British Industry said on Sunday.

The government is struggling to contain a scandal about sexual harassment that has embroiled some of Britain’s political elite, raising concerns about Prime Minister Theresa May’s ability to lead the country towards a good deal.