Budget in focus as sterling rises to 2-1/2 week highs

[LONDON] Sterling rose for a fifth consecutive session on Monday as investors bought the British pound, judging the weekend's news around the progress of Brexit negotiations to be mildly positive for the struggling currency.

The pound rose to a high of US$1.3272 in early trades on Monday, its strongest since Nov 2, comfortably breaking above a Friday high and putting it on track for gains above the US$1.33 line.

Britain will submit proposals on how to settle its divorce bill with the European Union before an EU summit next month and is expected to negotiate hard, finance minister Philip Hammond said on Sunday.

Morgan Stanley strategists said the news may provide a temporary boost to sterling.

Britain's budget for 2018 to be unveiled on Wednesday was the main focus this week as it will likely be the last full spending and tax plan before the terms of Brexit are hammered out.

Finance minister Philip Hammond, under pressure to help weakened Prime Minister Theresa May, promised to speed up house building and said he had some room to help voters despite his squeeze on public finances.

"More than the minutiae that will be released during the budget, the assessment of the British economy will be a big driver for sterling," said Viraj Patel, an FX strategist at ING in London.

Sterling also scored some chunky gains against the euro, with the British currency gaining as much as 0.4 per cent to 88.90 pence as the euro struggled due to the collapse of the German election talks.

Latest positioning data for the week ending Nov 17 indicated that sterling short positions were reduced further with net shorts now at a slim US$373 million.

REUTERS