June 11, 2020 / 8:39 AM / 24 days ago

Sterling on track to break longest winning streak versus dollar since 2018

LONDON (Reuters) - The pound fell against the dollar and euro on Thursday, on track to end its longest winning streak against the U.S. currency in 2-1/2 years, driven by dollar moves and Brexit-related concerns.

FILE PHOTO: A bank employee counts pound notes at Kasikornbank in Bangkok, Thailand October 12, 2010. REUTERS/Sukree Sukplang/File Photo

The pound had risen 3.9% against the dollar in 10 consecutive days of gains starting on May 28 - its longest winning streak since January 2018.

Analysts say it is behaving like a “risk currency”, in that it strengthens when improving market sentiment weakens demand for the safe-haven dollar.

But this trajectory looked set to end on Thursday, as the pound changed course and fell back below $1.27, also falling to the key 90 pence level versus the euro.

Versus the dollar, the pound fell as much as 0.9% on the day to $1.2634 at 1349 GMT, having risen to a three-month high above $1.28 on Wednesday GBP=D3. By 1500 GMT it was down 0.8% at $1.2643.

Against the euro, the pound fell overnight, steadied in early London trading, then fell further, reaching the key 90 pence per euro level at 1446 GMT, down around 0.9% on the day EURGBP=D3.

The market has its largest net short speculative position on the pound since November 2019, as Brexit and speculation about negative rates pose downside risks. [1096742NNET]

Britain has left the European Union but the main terms of its membership remain in place during a transition period until the end of 2020.

Britain has until the end of the month to request an extension to the transition period. A fourth round of Brexit negotiations ended with little progress.

“We continue to think Brussels and the UK will reach an agreement covering merchandise trade, but prefer to wait for better levels before buying the GBP,” Stephen Gallo, European head of FX strategy at BMO Capital Markets wrote in a note to clients.

The EU’s Brexit negotiator, Michel Barnier, urged London to adjust its demands on Wednesday, saying Britain was seeking a trading relationship with the EU that was too close to that of a member.

On Thursday, French lawmakers have urged their government to take a hard line over fishing - one of the key sticking points in negotiations.

Michael Hewson, chief market strategist at CMC Markets, said it was unlikely that Britain would ask to extend the transition period before the end of June.

“Those comments by Barnier yesterday really sort of highlight the fact that we’re heading for no deal and really it’s a question of how that gets mitigated,” Hewson said.

“Ultimately there will be no winners,” he added.

Reporting by Elizabeth Howcroft, Editing by Timothy Heritage, Alex Richardson and Toby Davis

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