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Sterling falls as dollar recovers

Written by Business World, on 24th Jun 2020. Posted in World

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The pound fell against the dollar and euro in early London trading on Wednesday, weighed down by uncertainty over Brexit negotiations even after global risk appetite got a boost from positive economic data as countries ease their lockdowns.

For the past two days, the pound had risen against a weaker dollar, hitting a six-day high of $1.2541 at 0007 GMT on Wednesday, before reversing course as the greenback recovered.

British Prime Minister Boris Johnson unveiled on Tuesday a significant easing of the coronavirus lockdown in England, saying pubs, restaurants and bars can reopen from July 4.

But top medics signed an open letter on Wednesday in the well-regarded British Medical Journal, warning politicians that local flare-ups of COVID-19 are likely and a second wave is a real risk.

Uncertainty about ongoing Brexit negotiations also still posed a downside risk for the pound, analysts said.

"(Lifting the UK lockdown) does not alter the key GBP driving factor – the uncertainty about the UK-EU trade deal," ING strategists wrote in a note to clients.

"GBP to remain the European FX underperformer, despite the benign risk appetite," they added.

The pound fell back below the key $1.25 level versus the dollar to $1.2493 at 0800 GMT, down 0.2% on the day.

Versus the euro, the pound was also down around 0.2% at 90.49 pence, having hit three-month lows against the single currency on Tuesday.

Four years after Britain voted to leave the European Union, the pound is still well below its pre-referendum levels and there has been little progress in agreeing the country's future trading relationship with the bloc.

Britain and the EU are set to miss their agreed end-of-June deadline for assessing whether the United Kingdom's financial services regulation is deemed "equivalent" to regulatory standards in the EU.

This leaves just six months before a potentially messy UK exit, financial industry and EU officials say.

UK PMI data on Tuesday showed the private sector contracted less than expected as more businesses resumed work this montn. (Reuters)

Source: www.businessworld.ie

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