British Pound Corrects Lower in a Risk-off Market as Boris Johnson Takes 'No Deal' Threat to Luxembourg

Sterling advanced against all major rivals Friday after being boosted by speculation suggesting the British government could be softening its red lines on the so-called Northern Irish backstop in pursuit of an amicable exit agreement with the EU ahead of an October 31 deadline.

The Pound traded in volatile swings against most major rivals Thursday and was lower against its European counterparts by the London close but higher relative to commomity currencies and the U.S Dollar, with international factors firmly in the driving seat of the British unit amid another period of limbo in the Brexit process.

A recent run of "good news" on the Brexit front may be coming to an end - and with it, the rebound Sterling has enjoyed in recent days says a leading FX analyst.

The British Pound is being tipped to remain supported over coming days, amidst growing signs that Prime Minister Boris Johnson's strategy going forward now rests on reaching a new deal with the EU, while labour market data has come in better than economists had been expecting.

According to Zach Pandl, an analyst with Goldman Sachs, the recent developments in UK politics "has narrowed the path to a 'no deal' Brexit, skewing near-term risks to Sterling to the upside."

Parliament will be suspended today it has been confirmed, and we therefore expect nerves towards Sterling to remain elevated in the near-term as the Government seeks ways to foil parliament's demands for a Brexit delay to be requested of the EU.

The British Pound is trading near recent highs against the Euro, and is forming a base near multi-month lows against the Dollar as markets judge the prospect of a 'no deal' Brexit taking place on October 31 has diminished over the course of the past week.

The British Pound is paring recent gains as markets approach the weekend, with traders awaiting details on the date of when an expected snap General Election will take place.