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Sterling above $1.33 first time in 2020, hits 8-month high as dollar falls

Credit: REUTERS/DADO RUVIC

Sterling rose above $1.33 for the first time in 2020 and touched an eight-month high versus the U.S. dollar purely on the greenback's weakness in the aftermath of Federal Reserve Chairman Jerome Powell's speech at Jackson Hole.

By Olga Cotaga

LONDON, Aug 28 (Reuters) - Sterling rose above $1.33 for the first time in 2020 and touched an eight-month high versus the U.S. dollar purely on the greenback's weakness in the aftermath of Federal Reserve Chairman Jerome Powell's speech at Jackson Hole.

In his address, Powell steered expectations of lower interest rates for longer as the central bank gets ready to accept an inflation above target after so many years of it undershooting 2%.

Against the euro, the pound remained relatively steady, with most traders staying on the sidelines and not taking a clear directional view on the British currency in thin August trading.

"It's this intermediate period when everyone is waiting to see how things develop," said Esther Maria Reichelt, a forex analyst at Commerzbank.

Renewed weakness in the British pound is not out of the woods, analysts say, as a mix of Brexit uncertainty, coronavirus fears and dismal economic data could well mean a return to a continuous decline in sterling.

British business confidence has ticked up but remains far below usual levels as the economy struggles to cope with social distancing and employers are preparing to cut jobs, a survey showed on Friday.

"At the moment we're concentrating a bit more on the Fed and the dollar, but it will come that there's interest in sterling again," said Andreas Koenig, head of global FX at Amundi, adding that its fate will be determined by whether Britain manages to successfully agree on a future trade deal with the EU.

Prime Minister Boris Johnson will launch a public campaign next week to get Britain back to the workplace, as ministers warn working from home will make people more vulnerable to being sacked, The Telegraph newspaper reported.

Britain is trying to find a way to revive its serviced-based economy even if it means doing so while COVID-19 - the respiratory disease caused by the virus - remains a threat.

It said on Friday it will back three nationwide COVID-19 studies with 8.4 million pounds ($11 million) for research into understanding human immune responses to the pandemic.

The pound was last trading hands at $1.3289GBP=D3, up 0.7% on the day, having rallied earlier to as high as $1.3320, its highest since mid-December.

Versus the euro, it stood still at 89.50 pence EURGBP=D3, flat on the day, but still close to the 2-1/2-month high of 89.30 pence it rose to on Thursday.

Traders were watching for the Bank of England Governor Andrew Bailey's speech at Jackson Hole later in the day.

Commerzbank's Reichelt said Bailey might hint on whether the BoE might consider negative interest rates in the future or not, but otherwise the speech may be more of a non-event, she said.

(Reporting by Olga Cotaga, Editing by William Maclean and Mark Heinrich)

((olga.cotaga@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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