Pound drops on anxiety over looming end of UK COVID restrictions


* Chart: World exchange rates in 2020 http://tmsnrt.rs/2egbfVh

* Chart: Pound sterling weighted since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Sujata Rao

LONDON, July 15 (Reuters) – The British pound fell further against the dollar and euro on Thursday, ignoring another round of stronger economic data and focusing on the imminent end of activity restrictions even then that COVID-19 infection rates were increasing.

Global markets were in an uncertain mood, as strong economic data and corporate earnings on the one hand are offset by the rise in the number of virus cases, particularly in Asia.

Britain is expected to drop all COVID-related activity restrictions from next Monday, including mandatory mask wear. While two-thirds of UK adults are fully vaccinated, scientists are warning that another wave of infections, especially from the more transmissible Delta variant, is inevitable when restrictions end.

Anxiety appears to be treading on signs the economy is rebounding strongly from the lockdowns. Data showed 356,000 jobs were created in June from May and the fastest year-to-May wage growth since the record began in 2000.

The figures come after Wednesday’s data showed inflation at 2.5% in the 12 months leading up to June, beating the central bank’s target. Markets now expect the Bank of England to hike interest rates to 0.25% by August 2022.

But at 8:35 a.m., the British pound depreciated 0.3% against the dollar to $ 1.382, retreating further from two-week highs reached earlier in the week. Against the euro, too, it slipped 0.3% to 85.6 pence, moving away from the 3.5-month highs reached on Wednesday.

“Sterling feels like it’s a price tag as the economy reopens too soon,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

He said markets were also under pressure by signs of disagreement between the central government on the one hand and regional and transport authorities on the other, with the latter keen to maintain certain restrictions.

“A few months ago it seemed the UK was ahead in terms of vaccination, but what the market was not anticipating was the increase in the Delta variant,” added Onuekwusi.

The end of job subsidies which supported 2.4 million jobs at the end of May, but which are phased out by the end of September, is also likely to raise unemployment again.

(Reporting by Sujata Rao; editing by Angus MacSwan)

Source link


About Author

Leave A Reply