| LONDON, Sept 20
LONDON, Sept 20 Sterling steadied against a
broadly weaker dollar on Tuesday, in the run-in to U.S. and
Japanese central bank meetings that were taking the market's
focus temporarily off the latest concerns over the shape of
Britain's exit from the European Union.
The pound had staged a modest recovery on Monday after
slipping below $1.30 last week for the first time in a month.
It traded 0.2 percent higher in early deals on Tuesday at
$1.3047 and 85.87 pence per euro respectively.
The focus was briefly on the Bank of Japan and U.S. Federal
Reserve meetings both ending on Wednesday, although Brexit
concerns will take over once those events are out of the way.
"Sterling is doing the better part of nothing ahead of
tomorrow's FOMC. The noise on Brexit over the past week has
given us more reason to sell any rallies," said Tobias Davis,
Head of Corporate Treasury Sales at Western Union in London.
"$1.33 was viewed as a short term uptick by most in the
market and a decent enough level to sell, but the currency
remains sticky around fairly significant support lines at
After a period of relative calm over the summer, debate
around the pace and dangers of negotiations with Brussels over
how Britain will exit the EU are back in the spotlight.
The head of Germany's Bundesbank warned on Monday that banks
based in Britain would lose access to EU markets after Brexit
unless the country remains in the broader European trading group
that includes nations such as Norway.
That suggested Berlin may take a tough line on an issue that
carries with it the risk of undermining London's huge financial
sector, which accounts for around 10 percent of the UK economy
as a whole.
The Bank of England also underlined the risks last week,
warning that it may still need to cut interest rates again
despite some stronger than expected signals on the economy in
the past month.
All that said, positioning data suggests investors have
become net slightly less negative on the outlook for the pound
in the past week while still holding massive "short" bets that
leave them exposed to any rise.
Analysts from Dutch bank ABN Amro said they had upped their
forecasts for the pound for the end of the year.
"With positions being this substantial, other positive
surprises in UK macro-economic data will likely result in an
enormous squeeze of these net-short sterling positions," ABN
analyst Georgette Beale said.
"Our year-end forecasts for EUR/GBP and GBP/USD are 0.83 and
1.33, respectively. The risk is tilted towards the upside."
(Editing by Hugh Lawson)