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Pound weakens on political discord ahead of Brexit negotiations

A bank employee counts pound notes at Kasikornbank in Bangkok, Thailand, October 12, 2010. — Reuters picA bank employee counts pound notes at Kasikornbank in Bangkok, Thailand, October 12, 2010. — Reuters picLONDON, July 17 — The pound fell from a 10-month high against the dollar on concern that discord within the UK government is worsening before the nation starts the second round of Brexit negotiations with the European Union.

Sterling snapped a three-day advance ahead of the talks that are likely to focus on protecting citizens’ rights, which has been a key sticking point so far. Chancellor of the Exchequer Philip Hammond exposed tensions within the British cabinet at the weekend by stating that transitional arrangements at the end of talks are likely to last a couple of years, far longer than the couple of months suggested by Trade Secretary Liam Fox.

The currency rallied last week on more hawkish rhetoric from the Bank of England and weaker-than-expected US inflation data. Any divisions within Prime Minister Theresa May’s government could make it difficult to secure a good deal with the EU, while also posing a risk that her weakened mandate could crumble, forcing new elections.

“We’re seeing the division at cabinet level laid increasingly bare,” said Ned Rumpeltin, head of currency strategy at The Toronto Dominion Bank in London, who sees the pound falling to US$1.26 (RM5.40) by the end of this quarter. This “will be a factor for sterling all the way through the Brexit process, for as long as the current government stays in power.” — Bloomberg 

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