FX round-up: Sterling reels amid reports on Brexit negotiations

Sterling got thrashed at the end of the week amid reports pointing to upcoming potentially tough negotiations with Brussels
regarding post-Brexit arrangements, with each side reportedly staking out their initial positions.

A report in The Daily Telegraph citing five senior unnamed EU officials who said the UK faced such a "bureaucratic nightmare” that it might finally balk at going through with Brexit was seen by some as the trigger for a late-session drop in the pound, which left it 1.4% down for the week.

Cable lost 1.79% on Friday to trade at 1.3002 by the end of the day. Euro/gbp meanwhile was up by 1.01% to 0.8579, still near its post-Brexit highs.

In parallel, Bloomberg was referencing reports according to which people familiar with the Chancellor´s thinking had said he might be willing to ditch access to the European Union´s single market.

The more difficult the Brexit negotiations, the higher the likelihood that the Old Lady On Threadneedle Street might be called upon again to provide further stimulus, or so the thinking went.

Bloomberg´s median analyst estimate for the level of cable at year-end 2016 was 1.28.

Adding to the selling pressure, the latest consumer price data for August Stateside came in ahead of forecasts.

The US Bureau of Labor Statistics revealed that core inflation, which strips out energy and food prices, rose 0.3% month-on-month and 2.3% year-on-year last month following a 0.1% monthly increase and a 2.2% yearly gain in July. Economists had expected a month-on-month rise in core CPI of 0.2% and no change to the annualised rate.

Those figures weighed on the euro/dollar, sending it 0.79% lower to 1.1155, with dollar/yen rising 0.19% to 102.29.

The US dollar spot index advanced 0.86% to 96.108 by session´s end.