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Pound set to break record losing streak vs euro; May statement eyed

Credit: REUTERS/Phil Noble

The British pound was on track to snap a record losing streak against the euro on Friday as British Prime Minister Theresa May appeared to be about to announce her departure date after two years of trying to push through a Brexit divorce deal.

Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON, May 24 (Reuters) - The British pound was on track to snap a record losing streak against the euro on Friday as British Prime Minister Theresa May appeared to be about to announce her departure date after two years of trying to push through a Brexit divorce deal.

While there is no clarity on who her successor will be, markets are concerned that the next prime minister will want a tougher divorce deal, although the EU has said it will not renegotiate the Withdrawal Treaty it sealed in November.

Those concerns have pulled the rug from under the pound over the last two weeks, prompting traders to sell the currency against the euro and the dollar aggressively and dialling up expectations of Britain crashing out of the EU without a deal.

But on Friday, markets were broadly in a consolidation phase after 14 consecutive days of losses against the euro as traders trimmed back some of their negative bets on the pound before a mid-morning statement by May.

"None of this should come as a surprise to currency markets, and as such should already be priced in, with the pound already looking a little firmer in early trading," said Michael Hewson, chief markets analyst at CMC Markets based in London.

The pound edged up 0.1 percent up against the euro EURGBP=D3 at 88.28 pence. Against the dollar GBP=D3 it also rose 0.1 percent higher, to $1.2672.

Still, derivative markets were broadly quiet with risk reversals on the pound GBP1MRR= holding near recent lows while one-month volatility indicators remained subdued.

Political uncertainty remained front and centre for traders with retail sales data for April ignored as markets looked forward to a statement from May.

(Reporting by Saikat Chatterjee; Editing by Kevin Liffey)

((saikat.chatterjee@thomsonreuters.com; +44-20-7542-1713; Reuters Messaging: saikat.chatterjee.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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