Pound Falls as Brexit Lunch Fails to Yield Progress to Trade

(Bloomberg) -- The pound fell versus the dollar, reversing an earlier rally, as the U.K. and the European Union said there hadn't been sufficient progress to move Brexit talks on to trade.

Sterling continued to hold gains against the euro as the two sides appeared hopeful of progress in time for an EU summit later in the month, with European Commission President Jean-Claude Juncker saying he was “confident” they could meet that deadline. The pound had been boosted earlier in the day by reports a breakthrough was likely. 

“The positive tone of Juncker will have some of the ultra gloomy predictions for the summit fading away given it's clear the EU are seeking progress too, but positioning had built up in the last few days for a deal to have been made sooner,” said Jordan Rochester, a currency strategist at Nomura International Plc. “The risk-reward is that the politics finds a way around the impasse and we start moving onto transition talks.”

The pound fell 0.1 percent to $1.3470 as of 4:29 p.m. in London, after swinging between gains and losses of as much as 0.5 percent. It strengthened 0.3 percent to 88.02 pence per euro. The yield on U.K. government bonds rose six basis points to 1.29 percent, after dropping 10 basis points on Friday.

Sterling has rallied over the past four weeks versus the dollar, partly on the back of a weaker U.S. currency. A deal to move talks onto trade could drive the pound to new highs for the year, while a lack of positive developments could drive it below $1.33, according to Neil Jones, head of hedge fund sales at Mizuho Bank Ltd.

To contact the reporter on this story: Charlotte Ryan in London at cryan147@bloomberg.net.

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee

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