LONDON (Reuters) - The pound slid against the euro to its weakest since mid-September, hurt by a rally in the single currency and concerns about whether Britain can secure a post-Brexit trade deal with the European Union.
Sterling rose, however, against a dollar rattled by a speech by U.S. Federal Reserve Chairman Jerome Powell.
The currency has had a tough August, whacked by mounting concerns Britain could crash out of the EU without new trading arrangements in place on its scheduled exit day in March 2019.
“Fears of a ‘no-deal Brexit’ are reaching fever pitch ... Sterling has no support other than a bearish consensus and a low valuation,” said Kit Juckes, chief FX strategist at Societe Generale.
The biggest losses this month have come against a resurgent dollar, with weakness against the euro more contained.
But sterling fell to trade as weak as 90.390 pence per euro on Friday - a fresh 11-month low.
The pound found buyers versus the dollar as Powell’s speech to an annual research symposium was taken to be more dovish than expected. The British currency rose as high as $1.2880, up nearly half a percent on the day, before settling around $1.2845.
Britain’s Brexit minister Dominic Raab said this week London could meet an informal October deadline to agree a deal, but has also laid out the government’s plans in the case of a no-deal and disorderly exit.
EU leaders expect to miss the deadline and are likely to have to hold and emergency summit in November to consider any Brexit agreement struck with Britain, diplomats in Brussels said this week.
Market analysts say most investors have already priced in a delay beyond October. Reaching a deal is also only the first of several hurdles the EU and UK need to clear, such as parliamentary ratification of any agreement, before the March 2019 deadline.
MUFG strategist Lee Hardman said his analysis saw sterling as currently carrying a four-to-five percent “Brexit risk premium”. He said there remained the risk for further sterling weakness “the longer it goes towards year-end without a deal”.
Foreign exchange analysts have forecast that the pound will weaken to $1.20 in the event of a no-deal Brexit, a Reuters poll this month found.
Reporting by Tommy Wilkes; additional reporting by Tom Finn; editing by Andrei Khalip