UK's pound near record high against both dollar, euro

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UK's pound near record high against both dollar, euro

LONDON, Oct 4 Reuters - Sterling hovered near its highest levels in almost a week against both the dollar and the euro on Monday, as a generally stronger dollar kept the currency within near the levels hit on Friday.

Rising inflation expectations early last week saw bond yields rise higher and hit risk sentiment in equity markets, pushing sterling to its lowest levels since December 2020. Sterling moves closely in line with global risk sentiment.

The pound has made a tentative recovery since the early part of last week, hitting $1.3576 in early deals on Monday in London, his highest since Sept. 28th. That still leaves the USD as of today down 0.8% against the dollar.

Sterling was one of the best G 10 currencies against the dollar in the first half of 2021, boosted by a global reflation trade and optimism over Britain's vaccination programme. A post-Brexit hangover has left Britain facing a number of problems from a shortage of workers in the supply chain and disputes with the EU over Northern Ireland.

Shortages of workers after Brexit and the COVID - 19 pandemic have sown disarray in some sectors of the economy, with disruption of deliveries of fuel and medicine and leaving more than 100,000 pigs facing a cull due to a lack of abattoir workers.

The Brexit Minister has drawn up proposals to permanently replace the Northern Ireland Protocol, a part of the Brexit divorce deal, and the government will make a decision by the end of next month, British newspapers reported.

Ministers are also supposed to make a decision by the end of the year next month on whether to unilaterally suspend the Northern Ireland Brexit deal, The Times reported.

GBP has been volatile - caught behind a surprisingly volatile Bank of England and lingering Brexit-emerging business concerns - particularly over the sea border with Northern Ireland, said ING analysts Francesco Pesole and Chris Turner in a morning note.

Both topics hit the agenda today. BoE's Dave Ramsden speaks in CET at 14:15. He was one of the two MPC members voting for the BoE to end QE early. Later in the day we should hear Lord Frost at Conservative Party Conference. Here he can shed light on whether the UK government wants to fire up Article 16 protocol - potentially opening up a can of worms again. Against the currency, sterling was largely unchanged at 85.61 Pence per euro.