LONDON, Dec 5 (Reuters) - Sterling skidded to its biggest fall since Nov. 2 on Tuesday after being whipsawed by disappointing Brexit talks.
The British currency fell 0.53 percent to $1.3376 against the dollar as investors were disappointed after Britain fell short of securing a deal with EU officials on Monday before crucial trade talks begin next week. It slipped further after Scotland’s leader Nicola Sturgeon said the failure by Prime Minister Theresa May to secure a Brexit deal on Monday could signal the moment for opponents to push to keep Britain in the single market and customs union.
The FTSE stock index, however, edged 0.3 percent higher as the cable’s decline was seen benefiting exporters.
But analysts argued sterling’s losses were likely to be limited.
“The immediate fallout should be limited as markets have become well versed with the idea that Brexit won’t be solved overnight,” said ING. “We remain constructive on GBP.”
Societe Generale concurred. “Angst that an agreement will not be reached does not yet appear justified, so the pullback should be limited, and may attract buyers who missed the boat,” it wrote in a note.
Prime Minister Theresa May failed to clinch a deal on Monday to open talks on post-Brexit free trade with the European Union after a tentative deal with Dublin to keep EU rules in Northern Ireland angered her allies in Belfast.
May is scheduled to return to Brussels on Friday.
Britain’s monthly purchasing managers’ index (PMI) for the services sector will be released at 0930 GMT. (Reporting by Fanny Potkin; Editing by Saikat Chatterjee and Raissa Kasolowsky)