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Sterling rises above US$1.31 with Brexit talks in focus
[LONDON] The British pound climbed above US$1.31 on Monday, although trading was quiet without any significant Brexit-related developments.
Volatility in the pound has collapsed since European Union leaders and the British government last week announced Brexit would be delayed for up to six months.
That removed the immediate risk of a no-deal Brexit, but it also raised the possibility of months of uncertainty in Britain as politicians struggle over how - or whether - to leave the EU.
British Foreign Secretary Jeremy Hunt said on Monday that talks between the government and the opposition Labour Party to find consensus over a Brexit plan are more constructive than people think.
Goldman Sachs analysts said they believed there was still more upside than downside for the pound so long as the market focused on Brexit negotiations rather than macroeconomic news.
"Another extension to the Article 50 deadline lowers the probability of a quick resolution to the Brexit impasse, but we think the market seems to be taking this too far," they wrote in a note sent to clients.
"While slow, we see signs of progress in the negotiations, so there remains a meaningful chance that there is some resolution before the May 22 deadline."
Sterling rose 0.3 per cent to US$1.3100 by 1520 GMT. Against the euro, the pound was moderately lower at 86.27 pence per euro.
This week will offers more clues as to how the British economy is holding up in the face of prolonged uncertainty. Labour market data is due on Tuesday, inflation numbers for March on Wednesday.
"The UK labour market remains tight which should be reflected in the data on Tuesday," Sue Trinh, RBC's head of Asia FX strategy, said in a note.