Sterling stuck near two-week low after possible Brexit delay report

GBP/USD erases daily recovery gains, steadies near 1.2930

GBP/USD erases daily recovery gains, steadies near 1.2930

Sterling steadied on Wednesday but held near a two-week low as investors mulled a report that United Kingdom cabinet ministers are discussing plans to delay Brexit by eight weeks.

Economy as whole not yet prepared for no deal Brexit.

The Telegraph newspaper reported late on Tuesday that the delay would postpone Brexit to May 24.

British Prime Minister Theresa May will travel to Brussels on Thursday to tell European Union leaders they must accept changes to the post-Brexit Irish border arrangements or face the prospect of a disorderly no-deal exit.

The sharpening of rhetoric did not budge the pound much, with investors focused instead on plans to get a deal across the line.

The currency has been supported in recent weeks by belief that a last-minute agreement will avert a no-deal Brexit. But jitters have returned since a January 29 vote in parliament that asked May to persuade the European Union to accept changes to the Brexit agreement.

"I can understand that speculative market participants are ready to bet on the GBP recovery".

"I do not consider GBP weakness during this time to be sufficiently priced in". With the greenback preserving its broad-based strength toward the end of the week, the pair is down 0.17% on the day at 1.2931, and is losing more than 100 pips for the second straight week.

With another parliament vote due in mid-February, derivatives markets are painting a cautious outlook for the pound with shorter-dated risk reversals indicating a greater bias for sterling puts over calls.

Little clarity is expected on interest rates from a Bank of England meeting on Thursday.

Looking ahead to next week's session, the Pound US Dollar (GBP/USD) exchange rate may strengthen on Monday, following the publication of the UK's latest GDP figures.

Nevertheless, the pound could slide if BoE Governor Mark Carney adopts a dovish tone in his speech this afternoon and reiterates his previous warnings about the risks of a "chaotic" Brexit.

The Pound (GBP) is rangebound against the Euro (EUR) and the majority of its other peers this morning as markets await the conclusion of the BoE's first policy meeting of the year.

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