Sterling edged down against the dollar on Monday as investors eyed a reshuffle of Britain’s cabinet, though most said that bar any major surprises, the changes would be unlikely to significantly move the pound.
Prime Minister Theresa May said on Sunday she would announce changes to her ministerial team soon, with media reports saying her foreign, finance, interior and Brexit ministers would keep their jobs in a reshuffle starting on Monday.
Sterling has been trading between $1.30 and $1.36 since September, and traders say it will take major new developments in Brexit discussions — or a run of strong economic data that brings the timing of the next Bank of England interest rate hike forward — for the currency to break out of that range.
It inched down 0.3 percent to $1.3530 on Monday.
The Daily Telegraph reported May would create a new post to provide regular updates to the Cabinet on preparations for leaving the EU without a trade deal — an outcome the government says it wants to avoid, but is nevertheless drawing up contingency plans for.
UBS Wealth Management currency strategist Geoffrey Yu, in London, said such an appointment would be seen as moderately positive by markets as it would assuage concerns that the government is ill-prepared for a “no deal” scenario, but that he did not see the reshuffle affecting the pound materially.
“If the names bandied about materialize, the bulk of the news is already in the price. And by the sounds of it, the key ministries are going to remain as they are,” he said.
Positioning data on Friday showed speculators added to their bets on sterling strengthening in the week up to last Tuesday, but those positions are still only just in positive territory.
“If we get bad news or good news, markets are going to be in a holding pattern. It’s going to take a lot of good news — be it economic or political — to push positioning definitively toward the long or short side,” said Yu.
Against a broadly weaker euro, the pound edged up 0.1 percent to 88.61 pence.
“Any fundamental fallout for the pound seems unlikely from the PM’s team tinkering this week... (and) one should also not read too much into the appointment of a new minister responsible for managing Brexit ‘No Deal’ contingency plans,” wrote ING currency strategist Viraj Patel in a note to clients.
Patel added that any sterling pullback toward $1.34 should be seen as a buying opportunity. The Dutch bank sees sterling trading at $1.40 by the end of the first quarter. (Reporting by Jemima Kelly, Editing by William Maclean)