After April gains, pound slips as Brexit, economy weigh

LONDON (Reuters) - Sterling slipped against the dollar on Friday, as stalled Brexit talks and further signs of damage to Britain’s economy from the coronavirus pandemic took some shine off the currency’s gains in April.

FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

A source close to Britain’s negotiating team said the country was confident it can get a deal on future ties with the European Union if Brussels started treating it as an independent negotiator.

But, underlining what sources in Brussels say is an impasse at talks since Britain left the EU in January, French officials later reiterated the 27-nation bloc’s position that London must make concessions for a deal to be reached this year.

The two sides have been unable to find a compromise on three main areas - the so-called level playing field guarantees of fair competition, governance and fisheries policy, according to the sources in Brussels and London.

Despite the coronavirus outbreak, Britain has said it will not ask for an extension to this year’s transition period.

Negotiators have until the end of the year to hammer out a trade deal.

At 1450 GMT, sterling was down 0.3% against the dollar at $1.2556.

Against the euro, it was down 0.8% at 87.66 pence.

Sterling registered a 1.4% gain against the dollar in April, rallying hard last week.

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(Graphic: Sterling's springtime shine png, )

But with speculators turning negative on the pound for the first time since December 2019, analysts say the currency’s near-term future looks gloomy.

“Since the UK is being slow to announce how it intends to start lifting lockdown and because last week’s Brexit talks did not go well, I sense that sterling is likely to be vulnerable this month,” said Jane Foley, head of FX strategy at Rabobank in London.

Next week, the Bank of England’s meeting could provide direction. Data from the country’s central bank showed British households shunned new borrowing in March and a measure of house purchases plunging as the spread of the coronavirus began to hammer the economy.

Economic surveys elsewhere were dire too.

British manufacturers suffered the biggest fall in output and orders for at least three decades in April, as measures to slow the spread of the new coronavirus sent the economy into a steep downturn, data from IHS Markit showed.

British factory output risks falling by more than half during the current quarter after 80% of manufacturers reported a collapse in orders due to the coronavirus outbreak, trade body Make UK said.

Mortgage lender Nationwide said the country’s housing market is grinding to a halt as a result of the government’s coronavirus lockdown.

Prime Minister Boris Johnson said on Thursday Britain was past the peak of its coronavirus outbreak and promised to set out a plan next week on how it might start gradually returning to normal life.

Reporting by Ritvik Carvalho; Editing by Mark Potter