Sterling drops as Covid 'pingdemic' hits rebound in July

STERLING fell on Friday after a survey showed the UK’s economic rebound slowing sharply in July when a spike in COVID-19 cases forced hundreds of thousands of workers to self-isolate under Government rules.

Iceland director reveals staff shortages due to ‘pingdemic’

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Friday’s monthly purchasing managers’ index (PMI) data has shown the initial scale of the impact. The IHS Markit/CIPS flash composite PMI dropped to 57.7 in July from 62.2 in June. A reading above 50 indicates growth in the economy but the reading was the lowest since March and a sharper fall than most economists had forecast in a Reuters poll.

By 11am GMT, the pound was 0.2% lower versus the dollar at $1.3738, and down by a similar magnitude against the euro at 85.63 pence per euro.

Still, the pound has shown relative resilience this week to a broader selloff in many currencies – it is now nearly flat against the dollar – in the wake of concerns about the spread of the Delta variant of the coronavirus.

The Government said on Thursday daily testing would be rolled out to allow staff in key sectors to keep working instead of having to self-isolate automatically after exposure to someone who had tested positive for COVID-19 – a system that has caused huge disruption.

Official data on Friday showed British retail sales resuming their post-lockdown recovery in June this year after a surprise fall in May. 

Pound drops due to Covid pingdemic

Sterling drops as ‘pingdemic’ hits (Image: Getty)

Supermarket empty shelves

Supermarket shelves have been left bare due to the so-called ‘pingdemic (Image: PA)

Retail sales rose by 0.5% in June from May – a Reuters poll of economists had pointed to a 0.4% month-on-month increase in retail sales volumes in June.

MUFG analyst Derek Halpenny said he remained positive but that appetite for short-term buying was limited as investors wait to see whether there has been a decisive break in the link between rising COVID-19 cases and hospitalisations thanks to Britain’s rapid vaccine rollout.

Referring to the dispute between the United Kingdom and the EU over post-Brexit trading arrangements for Northern Ireland, he said: “We remain GBP bullish over the medium-term but that view incorporates assumptions like COVID risks receding and the NI (Northern Ireland) protocol issue being resolved.”

The pound had been a standout performer in 2021 thanks to Britain’s relatively fast rollout of vaccines, which has accelerated the pace of reopening.

READ MORE: Eurozone crisis: Public debt soars to as high as 209%

Pingdemic alert on phone

Spike in COVID-19 cases forced hundreds of thousands of workers to self isolate (Image: Getty)

At $1.37 it remains up just 0.6% for the year versus the dollar and off three-year highs of above $1.42 touched in February.

It comes as world stock markets perked up on Friday after a volatile week in which sentiment over the global economic outlook waxed and waned with each new headline on the Delta variant of the coronavirus.

Upbeat earnings helped lift European equities, while US stock futures rallied in a positive sign for the Wall Street open. But Asian shares outside Japan were lower as COVID anxiety continued to take a toll.

Financial markets have swung from one direction to another this week as investors try to assess what the surging Delta variant means for the world economy.

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UK Covid cases mapped

UK Covid cases mapped (Image: Express)

After recording its steepest one-day drop since May on Monday, the S&P 500 stock index went on to post the biggest one-day jump since March a day later. It was set to end the week higher. Currency, bond and commodities markets have seen similar gyrations.

“Equity markets are signaling some symptoms of being tired after a long rally and recognise the peak growth environment,” said Antonio Cavarero, head of investments at Generali Insurance Asset Management.

“But in the short-term, real yields are still too low to provide an alternative, so the evolution of what happens next depends on COVID and the macro data.”

The pan-European STOXX 600 index rose 0.9% and was set for a 1.2% weekly rise, its best in a month, supported by upbeat earnings. French car parts maker Valeo jumped 8% after it posted higher first-half sales and profit.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.7%, leaving it down 1.4% on the week.

Empty shelves in a supermarket

Rise in Covid cases has seen shops left bare (Image: Getty)

Japan’s Nikkei was closed for a holiday, but off 1.7% for the week and a whisker away from a seven-month trough.

Financial market volatility was expected to continue, given the resurgent Delta variant and economic uncertainty.

There were mixed signals from business activity surveys tracked closely by investors. In Britain, the IHS Markit/CIPS flash composite purchasing managers index (PMI) dropped to 57.7 in July from 62.2 in June, its lowest since March.

But the composite euro zone PMI climbed to 60.6 in July from 59.5, its highest reading since July 2000. It was ahead of the 50-mark separating growth from contraction.

Pascal Peronne, a fixed income portfolio manager at Eric Sturdza Investments in Geneva, said: ”Uncertainty has increased again with the pandemic. I don’t think there will be a closing of economies to the extent we saw last year, but we don’t know.”

William Murphy

William Murphy

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