LONDON, May 11 — Sterling dipped against the dollar today as rising US Treasury yields put the US currency in demand, with investors cautious about the easing of coronavirus lockdown measures in Britain.
As several countries moved to reopen their economies with a gradual easing of lockdown measures, risk sentiment recovered in markets, giving stock markets a boost. The yield on the US 10-year Treasury bond rose to 0.7036 per cent.
British Prime Minister Boris Johnson will today give details of how to get the economy back to work, after his attempt to plot a nuanced exit from the coronavirus lockdown prompted confusion, opposition and even satire across the United Kingdom.
The government will publish 50 pages of detailed guidance at 1300 GMT, Foreign Secretary Dominic Raab said on Monday.
Sterling rallied briefly during Asian trading hours after the message but gave up gains in early deals in London. It traded 0.2 per cent lower at $1.2381 at 0754 GMT.
Against the euro, it was 0.2 per cent lower at 87.48 pence.
“Mixed start to the week for the pound - with the cautious UK lockdown easing announced by PM Johnson having little lasting impact on the currency after an initial rally in early Asia trading,” said Viraj Patel, FX and global macro strategist at Arkera. “Instead, the dollar remains supported by rising US yields.”
Patel also noted the increase in short positioning on the pound in the latest CFTC data as being attractive for speculators to initiate further bets against the currency, especially if the Bank of England’s easing is not done yet.
The BoE last week held interest rates steady at its meeting and announced no further stimulus, although it said it was ready to take further action to counter the coronavirus pandemic’s fallout.
Britain’s economy has reeled from the pandemic, while Brexit talks continue with little progress on major sticking points before a June deadline to agree on any extension of negotiations.
Retailers have warned the government that its business bailout package of reliefs, grants and loans will not be sufficient to stop the “imminent collapse of many businesses”.
First quarter GDP figures will be released for the UK on Wednesday this week.
“Despite facing much criticism for muddying the waters with his speech to the nation last night, Prime Minister Boris Johnson’s efforts to restart the economy may be welcomed by the pound,” ING strategists said in a note.
“Euro-sterling in particular has started to trade in an uncharacteristically tight range – roughly between 0.87 and 0.88 – and let’s see whether momentum builds on the downside.” — Reuters