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Sterling takes British reopening delay in its stride

Sterling takes British reopening delay in its stride
Sterling takes British reopening delay in its stride   -   Copyright  Thomson Reuters 2021
By Reuters

By Tommy Wilkes and Joice Alves

LONDON -Sterling was largely unmoved by Monday’s news that Britain is set to delay the end of social distancing measures as the government seeks to contain a rapid rise in COVID-19 infections.

Prime Minister Boris Johnson is expected to announce a delay of four weeks to his February roadmap, under which his government signalled that all social restrictions to control the spread of the disease would be lifted “no earlier” than June 21.

Sterling, which has been one of the best performing currencies in 2021 as investors bet on a strong British economic rebound, hovered just below recent highs.

Against the dollar it dipped as much as 0.3% to a one-month low of $1.4069 but recovered some ground to $1.4114, to trade flat on the day at 1445 GMT.

The euro was 0.15% stronger against the pound at 85.90 pence, still stuck within the range of the past two months.

ING analysts said a delay to the easing of restrictions was expected and investors were more focused on economic data.

“We do not think this does too much damage to GBP, which instead will be focused on fresh macro updates on jobs and retail sales – both expected to be GBP supportive,” they wrote.

Speaking on Monday, Bank of England (BoE) Governor Andrew Bailey said managing nearly a trillion pounds ($1.4 trillion) of British government bond purchases would be a huge challenge for the central bank.

The BoE has taken an initial step to slow the pace of asset purchases and investors are pricing in a first interest rate rise from record lows late next year.

Britain’s relatively rapid COVID-19 vaccination rollout and signs of a strong economic rebound have bolstered sterling in recent months and encouraged investors to bring forward their expectations for some limited monetary tightening.

The Bank of England gathers for its next policy meeting on June 24.