LONDON (Reuters) - Britain’s pound fell against the dollar on Thursday in a session that saw it flip direction several times as investors saw uncertainty surrounding the country’s departure from the European Union outweighing signs of economic resilience.
Graphic - Trade-weighted sterling since Brexit vote: here
Graphic - Global foreign exchange rates in 2017: here
Graphic - Sterling and gilt yields: here
The pound bounced on Wednesday on stronger-than-expected services activity data, which suggested Britain’s dominant services sector was still thriving.
But it gave up some of those gains on Thursday, as investors took the view that until either Britain or the EU shows evidence of softening their negotiating stances, Brexit would be negative for the British economy.
Sterling was slightly lower on the day at $1.2477 in late trade. It was 0.1 percent higher at 85.31 pence per euro.
“The pound-dollar should actually remain range bound for quite some time,” said Alejandro Zambrano, chief markets analyst at Amana Capital.
“In the back of their heads investors are still worried about Brexit even though the PMI services number was really good.”
Sterling has lost nearly a fifth of its value against the dollar since Britain voted last June to leave the EU.
Since then, investors have broadly stayed bearish on the currency despite initial signs of resilience from the economy that confounded expectations of a slowdown, worried about long-term uncertainty surrounding Brexit.
Speculators took their bets against the pound versus the dollar to record highs last month, although they have since trimmed those short positions. [IMM/FX]
“The moment I’ll turn my view around and turn materially long on sterling is when I know the European Union is willing to give Britain a good deal on services — financial services to be more specific,” said Jordan Rochester, currency strategist with Nomura.
“Confidence on both sides is pretty firm, so the initial talks are going to be slow and it’s not until mid-May when those talks start.”
European Council President Donald Tusk met British Prime Minister Theresa May in London on Thursday.
The EU’s chief negotiator, Michel Barnier, insisted on Wednesday that Britain must stop pressing for immediate parallel talks with the bloc on a post-Brexit free trade deal, and first agree on withdrawal terms.
Investors are eyeing an EU summit on April 29, where EU directives for Brexit negotiations will be ratified.
Reporting by Ritvik Carvalho Editing by Ralph Boulton