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Sterling looses ground as Euro gains

The euro climbed to a two-week high today on relief that Catalonia had stopped short of formally declaring independence from the rest of Spain.

Sterling was flat on Wednesday after two sessions of gains as doubts emerged on whether entrenched expectations of higher UK interest rates were reasonable given a backdrop of uncertain Brexit negotiations.

Despite Brexit and falling projections for UK economic growth, futures markets are pricing in 50 basis points of Bank of England rate increases over the next year, the most in the developed world apart from Canada.

UK manufacturing output rose by a monthly 0.4 percent in August, data showed on Tuesday, faster than a forecast of 0.2 percent in a poll of economists.

The outlook appeared fragile, with some market watchers including like Morgan Stanley preferring to sell sterling on rallies on Brexit worries.
Should the start of the UK-EU (post-Brexit) trade deal be postponed, UK inward investment may suffer.

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