Sterling at ten-week low as Brexit unease overshadows budget
* Graphic: World FX rates in 2018
* Graphic: Trade-weighted sterling since Brexit vote
LONDON, Oct 30 (Reuters) - Sterling languished at a ten-weeklow on Tuesday as concern about Britain's departure from the EUled investors to largely ignore hopes of an end to austerityraised by Britain's finance minister Philip Hammond.
The pound has weakened 4 percent since September as tradersfret over lack of progress in divorce talks over issuesincluding the Irish border five months before Britain exits theEuropean Union.
After a decade of cuts to public services, Hammond's budgeton Monday offered a glimpse of higher spending. But he madeclear that that will hinge on London getting a trade agreementwith Brussels. "The market is entirely certain that the British economywill only be able to benefit from the attested end of austerityannounced yesterday if an orderly Brexit is achieved," saidEsther Maria Reichelt, an FX strategist at Commerzbank inFrankfurt.
"An agreement does not seem to be any closer so there isstill the threat of a no-deal Brexit ...And that is all thatmatters for sterling at the moment."
On Wednesday the pound fell 0.2 percent versus abroadly stronger dollar to $1.2756, its lowest since 20 August.It also lost ground against an otherwise under-pressure euro,falling to a one-month low of 89 pence. Sterling traders are turning their attention to the Bank ofEngland's monetary policy meeting on Thursday, where it isexpected to keep interest rates on hold and detail conditionsnecessary for policy tightening.
"Were it not for Brexit, the BoE on Thursday would probablybe providing guidance on a rate hike, possibly in February giventhe compelling evidence of rising wage growth," MUFG analystssaid in a note.
(Reporting by Tom Finn; editing by John Stonestreet)
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