September 4, 2018 / 9:34 AM / 8 months ago

UPDATE 3-Sterling trims losses on BoE's Carney news, Irish border report

 (Updates market action after EU report on Irish border
    LONDON, Sept 4 (Reuters) - The pound recouped some losses on
Tuesday after Bank of England Governor Mark Carney said he was
ready to stay in his job beyond his planned leaving date, but
concerns over Brexit kept a lid on the British currency's gains.
    Sterling's recovery was further spurred by a Reuters news
report the European Union could offer new guarantees to Britain
to win London's support for a solution aimed at avoiding an
Irish border after Brexit.             
    The pound has fallen recently amid weak economic data,
doubts over Prime Minister Theresa May's leadership and
opposition from the European Union to Britain's proposals for
exiting the regional bloc.
    It suffered its biggest daily drop against the euro in more
than three months on Monday after the European Union's chief
Brexit negotiator said he strongly opposed Britain's latest
    On Tuesday, the currency edged off a one-week low against
the dollar as Carney suggested to a parliamentary committee he
was willing to remain on as BoE governor to help ease Britain's
economy through its departure from the European Union.
    British media said last week that Carney could stay longer
at the BoE to allow the finance ministry to focus on Brexit
talks in the coming months.
    "The policy continuity that would ensue under Carney
extending his term would be supportive for sterling as it would
reduce policy uncertainty at a time when the currency is likely
to be riddled with other Brexit-related uncertainties," said ING
currency strategist Viraj Patel.
    The relatively small moves in sterling on Tuesday, however,
showed how personnel changes at the BoE will not significantly
impact markets when the major driver for the economy and central
bank policy is Brexit, Patel added.
    In August the BoE pushed interest rates above their
financial crisis lows, but signalled it was in no hurry to raise
them further as Britain heads for Brexit next year with no clear
plan for leaving the EU.
    The front-runner to succeed Carney is widely seen to be
Andrew Bailey, the chief executive of Britain's Financial
Conduct Authority.
    "This procrastination around one of the UK's most important
policy appointments is unwelcome ... (especially) at a time when
more than anything Britain needs certainty, about who will be
overseeing monetary policy into the next decade," said Michael
Hewson, chief market analyst at CMC.
    At 2:01 p.m. EDT (1801 GMT), the pound was down 0.12 percent
against the dollar          at $1.2857. Sterling fell to $1.2810
earlier in the session. 
    Against a broadly weaker euro, sterling             traded
up 0.2 percent at 90.065 pence.
    Sterling's bounce off its earlier lows accelerated after
Danuta Hubner, who chairs the European Parliament's
constitutional affairs committee, told Reuters: "We are open to
introducing some changes to the backstop solution so that it is
politically acceptable for the UK."
    A survey showing weaker than expected growth in Britain’s
construction sector in August - another sign of the economy
wilting in 2018 - piled further pressure on sterling.
    The purchasing managers' index (PMI) dropped to a
three-month low of 52.9 last month from July's 55.8, below all
forecasts in a Reuters poll of economists.
    The slide follows the weakest manufacturing PMI in more than
two years on Monday, but analysts will not have a broader
picture of the economy until figures for the much larger
services sector are released on Wednesday.             

 (Reporting by Tom Finn in LONDON; additional reporting by Saqib
Ahmed, Richard Leong in NEW YORK; editing by William Maclean and
G Crosse)
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