LONDON, Sept 6 (Reuters) – Sterling edged higher on Thursday but remained well below highs hit in the previous session due to uncertainty over the progress of the Brexit negotiations, while trade concerns kept a lid on risk appetite.
The British currency edged up 0.1 percent to $1.2922 but remained well below a three-day high of $1.2983 hit in the previous session. Against the euro, it rose by a similar margin to 90.05 pence.
“Brexit negotiations are front and centre for markets, and despite yesterday´s headlines the near-term uncertainty is going to persist,” said Valentin Marinov, head of G10 FX strategy at Credit Agricole in London.
Bloomberg reported on Wednesday that the German and British governments had abandoned key Brexit demands, potentially easing the path for a divorce deal, sending the British currency rocketing higher against the euro and the dollar.
But subsequent news that German Chancellor Angela Merkel’s government is preparing for all Brexit scenarios, including a no-deal, after its cabinet approved a draft law on a transition phase for Britain after it leaves the European Union next year prompted investors to take some profits.
The British currency remains one of the most shorted among major currencies, along with the yen and the Swedish crown, and any slightly positive headline on the progress of the Brexit negotiations tends to elicit a big market reaction.
Trade concerns also weighed on sentiment after U.S. President Donald Trump threatened fresh tariffs on another $200 billion worth of Chinese imports.
Chinese stocks were in the red as Beijing said it would be forced to retaliate if the United States implements any new tariff measures. (Reporting by Saikat Chatterjee Editing by Gareth Jones)