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GBP Up, Health Minister Urges Lifting of COVID Restrictions

LONDON, June 28 (Reuters) - Sterling edged higher on Monday after Britain’s new health minister, Sajid Javid, said he wants all COVID-19 restrictions lifted as soon as possible.

Javid was due to update lawmakers later on Monday on whether restrictions should be removed on July 19 as the government previously indicated. Javid has replaced Matt Hancock, who resigned on Saturday after admitting breaking COVID-19 guidance with an affair.

“As a former chancellor (finance minister) he (Javid) will be more sensitive to the costs suffered by the economy of lockdowns,” said Jane Foley, Head of FX Strategy at Rabobank.

Daily positive cases have been rising for a month in Britain but a rapid vaccination programme appears to have weakened the link between infections and deaths, with daily fatalities remaining about 20 or lower.

Sterling rose 0.2% to $1.3896 versus the dollar at 1130 GMT, but it was on track for its worst months against the greenback since September.

Against the euro, the pound rose 0.2% to 85.78 pence, but was still bracing for the worst quarter against the common currency in a year.

Neil Jones, head of FX sales at Mizuho Bank attributed sterling’s rise to seasonal fluctuations.

“Historically the price action does tend to suggest a firm sterling into the end of month and quarter,” he said.

This month, sterling dropped for the first time since April below $1.38 against a strengthening dollar after the U.S. Federal Reserve surprised markets by signalling it would raise interest rates and end emergency bond-buying sooner than expected.

Sterling was one of the worst performing G-10 currencies last week after the Bank of England kept the size of its stimulus programme unchanged and said inflation would surpass 3% as Britain’s economy reopens, but the climb further above its 2% target would only be temporary.

Investors this week will also be watching a dispute between Britain and the European Union over post-Brexit trade in the British province of 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 June 30.

“The mood music on this had been positive last week, but failure to hear anything before Wednesday could un-nerve GBP,” ING strategists wrote in a note.

Reporting by Joice Alves Editing by Gareth Jones

Source: Reuters

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