By Elizabeth Howcroft
LONDON -Sterling was little changed on Wednesday, slipping slightly against the dollar but lacking direction overall as investors weighed up COVID-19 data and waited for the Federal Reserve’s annual symposium on Friday to give momentum to the dollar.
Risk appetite was mixed, with riskier currencies such as the British pound supported by higher commodity prices at the start of the week, but any gains limited by concerns about the Delta variant.
Market attention is focused on Friday’s Jackson Hole conference, at which some investors expect Chair Jerome Powell to give hints about tapering the Fed’s bond-buying scheme.
At 1413 GMT, the pound was down 0.1% against a slightly stronger dollar at $1.3721. On Friday last week, the pound dropped to a one-month low of $1.3602 as the dollar index strengthened.
Versus the euro, the pound was flat at 85.66 pence per euro. The pound has generally benefited from expectations that the Bank of England will tighten policy before the European Central Bank.
“GBP remains very much range-bound, with few immediate drivers seen on the horizon. GBP may take some lessons from Hungary, however,” ING strategists wrote in a note to clients.
Hungary’s central bank said on Tuesday it would start gradually withdrawing its bond-buying programme.
“Hungary’s test case suggests the FX market rewards a taper with a stronger currency,” ING said.
Analysts are also keeping an eye on COVID-19 data. Since mid-July when lockdown restrictions were lifted, Britain has been reporting a steady increase in the numbers of people dying.
“COVID news has the potential to have some sort of restrictive influence on consumer behaviours and I think all of these do feed into the Bank of England debate for next year,” said Jane Foley, head of FX strategy at Rabobank.
Speculators reduced their net long position on the pound in the week up to last Tuesday, CFTC data showed on Friday. This means that speculators are less bullish on the currency than they were earlier.
British retailers reported the biggest surge in spending in almost seven years this month. Orders hit a new high but stocks fell to the lowest levels on record, putting pressure on prices, industry data showed on Tuesday.