Sterling struggled to cling on to the $1.30 level on Thursday as traders waited to see whether a meeting of European Union leaders in Brussels would signal any progress in troubled Brexit talks with Britain.
The pound has risen in recent sessions, propelled by a sense that Britain and the EU will secure a trade deal before the end-2020 deadline. But sterling remains far below a 2020 high of nearly $1.35 hit in early September -- many investors reckon that even if a deal is reached, it will be a limited one.
British Prime Minister Boris Johnson had proposed an Oct. 15 deadline to conclude talks for an agreement, and the European Commission had an Oct. 31 deadline, but market-watchers say neither of those dates constitute a hard stop on negotiations.
“On Brexit, we have seen negotiations with the EU go down to the wire. But the original deadline of 15 October looks difficult and we may see that postponed to end-October/early November. The next few weeks will be crucial,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.
“We are positioned neutrally on sterling but given the negative news flow we might look to take a contrarian view on the currency as any deal would trigger a relief rally.”
Goldman Sachs said in a note on Thursday that a thin Brexit trade deal was likely to be struck by early November even if there is some political drama at the EU summit.
Sterling dipped 0.1% to $1.2994 in early London trading after reaching as high as $1.3030 in Asian hours.
The pound was unchanged versus the euro at 90.265 pence. The British currency traded as strong as 88.66 pence in early September before tumbling to as low as 92.90 pence by the middle of the month after London said it would undercut its earlier divorce treaty with Brussels.
Reporting by Tommy Wilkes and Saikat Chatterjee; Editing by Gareth Jones