August 3, 2018 / 8:20 AM / 3 months ago

Sterling slides below $1.30 as Carney flags no-deal Brexit risks

* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

LONDON, Aug 3 (Reuters) - Sterling fell below $1.30 to an 11-day low on Friday after Bank of England Governor Mark Carney said there was an “uncomfortably high” risk of Britain leaving the European Union without a deal.

The pound was already under pressure after the BoE raised interest rates on Thursday, because the central bank also signalled it was in no rush to tighten policy further.

With less than eight months until Britain leaves the EU, the government has yet to agree a divorce deal with Brussels and has begun talking more publicly about the prospect of leaving the bloc without a formal agreement on how their future relationship should be structured.

The pound dropped 0.3 percent to an 11-day low of $1.2975 , close to the 10-month low of $1.2958. Pound weakness has coincided with a broad rally in the dollar this week.

Against the euro, sterling slipped 0.1 percent to 89.10 pence per euro.

The UK’s Purchasing Managers Index survey for the dominant services sector is due at 0830 GMT. Recent data have showed some more strength in the UK economy but sentiment remains fragile.

With the next six months set to be dominated by efforts to agree a Britain-EU trade deal, money markets do not expect the BoE to hike rates again until late next year.

“We remain more hawkish than the market (the short-end rallied modestly yesterday) and see the next 25bp (basis point) move by the Bank being in February next year,” George Buckley, UK economist at Nomura, said.

“Much will likely depend on how the Brexit negotiations have fared between now and then – with the next six months crucially important in that respect.”

Reporting by Tommy Wilkes; editing by John Stonestreet

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