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Sterling Rises as Investor Risk Sentiment Improves

LONDON (Reuters) - The pound inched higher on Tuesday as investors turned their attention to U.S. Federal Reserve and European Central Bank meetings this week at which officials are expected to provide further stimulus to their economies to fight the coronavirus.

Sterling has been very closely correlated with riskier assets such as stocks and when investors’s risk appetite increases, the pound tends to move up.

The pound was last up 0.4% at $1.2468, having risen earlier to an eight-day high of $1.2479. The British currency was also higher versus the euro, trading 0.1% at 87.02 pence after rising also to an eight-day high of 86.91 pence.

The Bank of Japan said on Monday it was expanding its stimulus to help companies hit by the coronavirus crisis, pledging to buy an unlimited amount of bonds. Traders now expect the Fed and the ECB to follow suit, on Wednesday and Thursday respectively.

“I would assume that the pound is tracking risk assets higher,” said Stephen Gallo, European head of FX strategy at BMO Financial Group.

“On the whole this week, given all the central bank meetings that are coming, anyone who had risk-off trades on, they probably would be trimming some of that exposure. You don’t fight the central banks,” Gallo said.

A further 360 people have died from COVID-19 in British hospitals, latest data showed on Monday, bringing the total to 21,092. It was the lowest daily death toll for four weeks.

Officials, including Prime Minister Boris Johnson, warn against lifting lockdown measures too early.

Reporting by Olga Cotaga; Editing by Angus MacSwan

Source: Reuters

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