By Yoruk Bahceli
LONDON(Reuters) - The pound fell on Monday after comments by UK finance minister Sajid Javid stoked fears about weak ties between the UK and the European Union following the country's departure from the bloc.
In an interview with the Financial Times on Saturday, Javid said Britain would not commit to sticking to EU rules in post-Brexit trade talks.
That is a threat to businesses that want to ease cross-border checks with the EU once the transition period following Britain's departure on Jan. 31 terminates at the end of the year.
The pound was last down 0.2% against the U.S. dollar to $1.2978. It was down 0.3% against the euro at 85.50 pence. (EURGBP=D3)
"It's about the UK diverging from Europe, and that would necessarily result in limiting access to European markets," said RBC Capital Markets chief currency strategist Adam Cole. "Markets are taking that negatively."
The focus this week will be on Friday's PMI numbers, which analysts say are the remaining key data releases to gauge whether the Bank of England's will cut interest rates at its Jan. 30 meeting.
Money markets are pricing in around a 70% chance that the bank will cut its 0.75% policy rate by a quarter point .
"There is not a huge amount of downside to go for," RBC's Cole said of the data, given how high rate-cut expectations already are. "A bigger market reaction would be if the PMIs came in better than expected."
Despite the potential rate cut and the future of Britain's relationship with the EU, traders remain optimistic. They held the largest sterling long position in 21 months, at $2.57 billion, weekly data to Jan. 14 showed .
For a graphic on Sterling long positions reach 21-month high:
https://fingfx.thomsonreuters.com/gfx/mkt/13/1280/1266/sterling%20long%20positions.png