Pound Sterling seen advancing on the US Dollar
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At 8.08am today, the pound was valued at $1.3869, close to its highest in 13 days. The currency was holding its own against the euro, having briefly strengthened to 0.84995 earlier in the session – crossing the key psychological 0.85 level for the first time since April.
Analysts have attributed the pound’s gains to COVID-19 cases in Britain declining over the last seven days, although Prime Minister Boris Johnson has nevertheless advised against drawing conclusions from the data, insisting it was too early to determine whether there was a definite trend.
Sentiment has also been lifted by an expected lessening of travel restrictions.
Jeremy Thomson-Cook, Chief Economist at international business payments specialist Equals Money, said: “Sterling ended yesterday sharply stronger without too much reason.
Boris Johnson will be boosted by the news (Image: GETTY)
Andrew Bailey, Governor of the Bank of England (Image: GETTY)
“There is very little liquidity in markets at the moment and so moves can be outsized and we would not be surprised if the slight improvement in COVID-19 case numbers underpins some of the run higher for the pound.
“With a Bank of England meeting next week, it does look like the pound could continue higher should markets get behind the UK’s COVID-19 plans and view the improvement as sustainable.”
The decline in infections “has very much put a dent into fears that had been growing that UK growth in H2 was going to be less than previously expected”, said Stuart Cole, head macro economist at Equiti Capital.
Pound Sterling has been edging in recent days (Image: Google)
He added: “This sentiment had been weighing on sterling and as it has dissipated, so the pound has started to claw back some of its lost ground.”
George Vessey, UK Currency Strategist, Western Union Business Solutions, offered a US perspective.
Referring to a meeting of the US Federal Reserve, he said: “The pound has taken advantage of the dollar trading at lower ground.
“Market mood is mixed today in anticipation of the Fed meeting, but traders may be favouring the pound following the UK’s seven consecutive days of falls in COVID-19 infections, a result of restrictions and a high vaccination rate.”
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Coronavirus vaccinations live (Image: Express)
Pound sterling is also holding steady against the euro (Image: GETTY)
He added: “Besides the two-day Fed meeting, sterling traders will also be keeping an eye on the direction taken from the Bank of England (BoE) meeting next week.
“BoE interest-rate setter Gertjan Vlieghe said on Monday that the central bank should not scale back stimulus, possibly until well into 2022.
“He continued to say that a recent uptick in inflation is likely to be temporary and COVID-19 remains a threat to the economy, reiterating previous comments from the BoE that UK employment is more important to the bank.”
Mr Vessey said: “Elsewhere, UK Prime Minister Boris Johnson is considering opening up a travel corridor for freer movement between UK and US.
Coronavirus map live (Image: Express)
“He added that the UK-US travel corridor will likely allow people to ‘come freely in a way that they normally do’.”
Most lockdown restrictions in England were lifted on July 19.
Speculators went net short on the pound for the first time since December 2020 in the week up to last Tuesday, CFTC data showed on Friday.
In a note to clients, ING FX strategists wrote: ”Sterling is the best performing G10 currency so far this week, as it detached from global risk appetite dynamics and may have been buoyed by a slowdown in UK COVID-19 cases, which is raising hopes that the government’s decision to lift almost all restrictions may prove to be a sustainable approach.”
Pound Sterling is on the up (Image: GETTY)
ING said that sterling may test the 0.85 level versus the euro today, as there may be some hawkish speculation about the Bank of England meeting next week.
The Bank of England looks set to keep its stimulus running at full speed next week despite two policymakers breaking ranks to suggest that its nearly £900 billion ($1.2 trillion) bond-buying scheme might have to end early as inflation speeds up.
The percentage change in the rate of people with at least one positive COVID-19 test in the rolling period up to July 22 fell by five percent compared with the previous day – the most recent Government figures available.
The rate of cases per 100,000 people stood at 417 on July 22, compared with 462.2 the day before.