LONDON, July 5 (Reuters) - Sterling nudged higher on Monday with the British government expected to announce it will proceed with plans to fully reopen the economy in England later this month despite a surge in COVID-19 cases.
After falling to its lowest level since mid-April at $1.3733 last week, the pound was 0.2% higher against the dollar at $1.3861 by 1047 GMT. Versus the euro, it rose 0.05% to 85.71 pence.
British Prime Minister Boris Johnson will set out plans for the final step of easing COVID-19 lockdown in England on Monday, including guidance on social distancing, face coverings and working from home.
Data suggests that cases will continue to rise as restrictions are eased, the government said, but the link to hospitalisations and deaths has been weakened by the vaccination programme.
The final step of lockdown easing was delayed by four weeks last month to enable more people to be vaccinated as the now-dominant Delta variant of the coronavirus drives a rise in COVID-19 cases.
“The pound has strengthened a little today, albeit within familiar levels. The UK government could announce today that almost all restrictions will be lifted on July 19, which could put GBP bulls in a better mood this week,” said Jane Foley Head of FX Strategy at Rabobank.
The upward revisions to June IHS Markit/CIPS Purchasing Managers’ Index could also lend a little support to sterling, she added.
British services firms’ PMI index edged down from May but was slightly higher than a preliminary June reading. In the meantime, price pressures in the sector jumped by the most on record, adding to signs of a further rise in inflation ahead.
Last week, sterling took a hit after Bank of England Governor Andrew Bailey warned against an over-reaction to rising inflation in Britain, saying it was important to ensure that the recovery was not undermined by a premature tightening in monetary conditions, as a rise in inflation was likely to be temporary.
Sterling, however, found some support on the European Union’s decision last week to extend by three months an exemption on customs checks on chilled meat shipments to Northern Ireland, pausing its post-Brexit dispute with Britain.
(Reporting by Joice Alves; Editing by Kirsten Donovan and Toby Chopra)