FX roundup: Sterling shrugs of Brexit concerns to zip ahead against US dollar

Sterling turned in a chipper performance on most major crosses, although the risk of renewed weakness as a result of Brexit continues to lurk in the background, especially as the market increasingly sees a US rate hike in December as a foregone conclusion.

At about 17:16 GMT, sterling was up a hearty 1.14% to $1.2483, and was up 0.96% to €1.1768. The dollar-spot index -- reflecting greenback weakness -- was down 0.14% to $101.070.

FXTM research analyst Lukman Otunuga said that, overall, sterling remains heavily weighed down by this anchor known as Brexit with steeper declines expected if buying sentiment towards the currency continues to deteriorate.

"With expectations rising over the US Federal Reserve raising US rates in December, the bearish combination of sterling weakness and dollar strength could spark a sharp decline on the GBPUSD," Otunuga said in a statement.

"The weekly close below 1.240 on the GBPUSD may have sealed the deal for bears to drag prices lower towards $1.220," he added.

ETX Capital markets analyst Neil Wilson said sterling's sizeable vault against a softening dollar was relatively unfamiliar given the British unit's post-Brexit humbling.

"No one is terribly sure what caused it, although it may be down to stops being hit in thin trade," Wilson opined.

"A bit of pro-business rhetoric from (UK prime minister) Theresa May helped overall sentiment but doesn't really explain the timing of that jump," he said.

"The shine has since come off the pound a little after a spokesman for Theresa May said the prime minister won’t seek to extend the Article 50 process."

In a speech to the Confederation of British Industry (CBI) annual conference, May said the process of exiting the EU should not be rushed, and that there were opportunities to create partnership with old allies and new partners.

May further suggested she would seek a transitional Brexit deal to soften the impact for businesses once the UK left the EU. She said she would seek an arrangement to stop companies going over a "cliff edge".

Jasper Lawler market analyst at CMC Markets, was another market watcher who could see no immediate reason for sterling's gain, adding the "lack of liquidity for the British currency remains a source of unease."

The UK unit was also up against the currencies of emerging markets, such as the Australian, New Zealand and Canadian dollars, but down on South Africa's rand. It rose on Japan's yen.

Meantime, the dollar was down 0.2% to €0.9425, and also softer versus the aussie, loonie, kiwi and safa. It made minor headway against the yen.

"The US dollar dipped on Monday, snapping a 10-day winning streak for the US dollar index," said Lawler.

"The source of the move was likely some strength in commodity markets as well as a natural correction from a very extended rally."

Lawler added that the dollar's weakness looked temporary for now since it was at odds with markets pricing in a 98% likelihood of a Fed rate hike in December.