LONDON (Reuters) - Sterling edged lower on Friday as investors booked profits after a rally, though the British currency is poised for a second consecutive week of gains on growing optimism about a Brexit deal at a European Union Summit next week.
Underscoring the British pound’s gains has been favourable comments from EU Brexit negotiator Michel Barnier earlier this week that an agreement with Britain could be “within reach” next week.
Negotiators from both sides have been locked in talks this week to overcome differences on the biggest outstanding hurdle to a deal - how to keep the UK frontier with the Irish republic free of border checks after Britain leaves the EU in March.
ING strategists advised caution on adding long bets on the British currency around current levels, because domestic politics might prove to be a major headwind.
The British currency slipped 0.2 percent lower but is down 0.4 percent from the day’s highs at $1.3207. Against the euro, it was broadly steady at 87.60 pence.
While long positions in sterling has increased in the last two weeks, overall bets remain near their lowest since May 2017, according to latest positioning data.
Brexit negotiations have changed pace and have become more positive over the past week, though there are still some big differences to resolve, British finance minister Philip Hammond said.
Reporting by Saikat Chatterjee; editing by Larry King