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Sterling drops on fresh Brexit uncertainty

Sterling drops on fresh Brexit uncertainty

Mubasher: Sterling pound fell on Monday, giving up some of last week’s gains, after the UK and European Union (EU) said a lot of work would be required to clinch a Brexit deal, according to Reuters.

By 12:11 pm GMT, the GBP/USD pair dropped by 0.99% to $1.2543, while the EUR/GBP pair climbed by 0.81% to GBP 0.8794.

At the end of last week, the UK currency soared, recording its biggest two-session gain in years, after London and Brussels announced the restart of Brexit talks to reach an agreement ahead of 31 October deadline.

A fresh uncertainty over an agreement on the UK’s separation from the EU was raised, as officials in Brussels said more concessions from Prime Minister Boris Johnson were needed, while a full deal this week seemed unlikely.

Market watchers, including UBS, warned that both sides face a few obstacles before they reach an agreement, even if the short-term outlook for the pound improved substantially, according to the news agency.

While too many concessions by the EU are potentially compromising the integrity of the single market, the UK side will be hampered by internal political hurdles, according to UBS.

“With time tight and much ground to cover we still, on balance, believe that the UK will be asking for a further extension to Article 50,” UBS economist Dean Turner was quoted by Reuters.