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Sterling Edges Lower vs. Dollar, Hits Lowest in over a Week

LONDON, June 29 (Reuters) - Sterling edged down to its lowest in over a week against the dollar on Tuesday, with the British currency on track for its worst month since September.

A broad strengthening in the dollar in recent weeks after a surprise hawkish shift by the U.S. Federal Reserve has brought some volatility back to currency markets, while also toppling sterling from levels near 3-year highs.

The fall in the currency has caused a shakeout in speculative bets, although CFTC data still shows the market maintaining a net long position on the pound.

Sterling has since traded between $1.38 and $1.40 as investors tread water over uncertainty around the spread of the delta variant of the coronavirus in Britain, which has forced the government to delay the final phase of reopening the economy.

Prime Minister Boris Johnson said on Monday that Britain was on course to be able to lift most remaining COVID-19 restrictions on July 19.

By 0744 GMT, sterling was 0.14% lower to the dollar at $1.3859, after hitting its lowest since June 21, at $1.3856. The currency was set for a 2.4% loss against the dollar this month.

Against the euro, the pound traded flat at 85.92 pence.

“Sterling continues to show some resilience to concerning domestic developments,” ING strategists said in a note.

“The UK registered the highest number of Covid-19 cases since January due to the fast spreading of the Delta variant across the country, but markets are probably finding some comfort on the fact that thanks to a widely-vaccinated population, hospitalization numbers and deaths are not rising as fast as they did in the previous virus waves.”

This is allowing both the UK government and the market to stay broadly confident that there will be no re-tightening of virus-containment measures on the back of the new outbreak, ING said, adding that the UK economy can remain on the recovery path without major bumps.

Sterling has also been on the backfoot as the Bank of England last week kept the size of its stimulus programme unchanged. Concerns over a dispute between Britain and the European Union over post-Brexit trade in the British province of Northern Ireland have also kept investors treading lightly.

European Commission Vice-President Maros Sefcovic said on Monday he was confident agreement could be reached within the European Union in the coming 48 hours to avoid a ban on chilled meat product exports from Britain to Northern Ireland.

The current grace period waiving checks on British-made sausages and other chilled meats moving to Northern Ireland is due to end on Wednesday.

Reporting by Ritvik Carvalho; editing by Philippa Fletcher

Source: Reuters

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