LONDON (Reuters) - The British pound laboured near two-month lows against the dollar and three-week lows versus the euro on Friday as doubt grows about whether the UK and the European Union can clinch a Brexit deal.
Brexit concerns and a stronger dollar had sent the pound to as low as $1.2777 earlier on Friday, its weakest since Aug. 20. Sterling partly staged a comeback to around $1.2824 as the dollar weakened on the back of large falls on Wall Street.
Bloomberg, citing people familiar with the matter, reported on Friday that Brexit talks were on hold because Prime Minister Theresa May’s cabinet was not close enough to agreement on how to proceed for the negotiations to restart.
The British currency was largely unchanged versus the euro, at 88.76 pence per euro, after earlier weakening to a three-week low.
“GBP remains in its usual state of flummox as the Brexit impasse continues, with politics at home the biggest stumbling block. Until this is resolved, we expect GBP/USD to trade below $1.30,” said Viraj Patel, a currencies analyst at ING.
With Brexit dominating the news agenda, Britain’s economic fortunes have taken a backseat.
Next week, the Bank of England is expected to leave interest rates unchanged and stress that while there are some signs of rising wage and price pressures, it will not be ready to tighten policy until there is clarity on Brexit.
“Fears of a no-deal Brexit and the wider risk-off market move have seen the (UK interest rate) curve flatten. Next week’s BoE policy statement is likely to restate the need for higher rates and we see scope for a steeper front end to money markets,” Societe Generale analysts said in a note to clients.
Reporting by Tommy Wilkes; Editing by Helen Popper