US Markets

Sterling falls against strengthening dollar, back below $1.39

Credit: REUTERS/Toby Melville

Sterling fell back below $1.39 on Tuesday as the dollar picked up in early trading, but the British currency was still above the two-month lows it reached on Monday after the Fed's hawkish shift.

Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON, June 22 (Reuters) - Sterling fell back below $1.39 on Tuesday as the dollar picked up in early trading, but the British currency was still above the two-month lows it reached on Monday after the Fed's hawkish shift.

The U.S. Federal Reserve surprised some market participants last week by signalling that it would raise interest rates and end emergency bond-buying sooner than expected - prompting the dollar to rise and riskier currencies to lose out.

The pound hit a two-month low of $1.37865 early on Monday, recovered later in the session, then dipped back down again on Tuesday, down 0.3% at $1.38965 at 0745 GMT GBP=D3.

Versus the euro, it was down 0.2% at 85.70 pence per euro, still trading within recent ranges.

Speculators increased their net long position on the pound versus the dollar in the week to June 15, CFTC data showed.

Investors are focused on the UK's reopening plans, after the full easing of lockdown was delayed by a month due to the more infectious Delta variant of COVID-19.

British Health Minister Matt Hancock suggested on Tuesday that England's lockdown could fully end as planned on July 19 because a recent rise in cases is not resulting in deaths.

"Although the pandemic is far from over, and potential new variants that render the current generation of vaccines ineffective present a serious risk, recent virus and vaccine developments support our positive economic outlook for the UK and other advanced economies," Kallum Pickering, senior economist at Berenberg wrote in a note to clients.

Also in focus is the Bank of England meeting on Thursday. Analysts expect no changes to policy after the BoE last month said it would slightly slow the weekly pace of its bond purchases.

"There is a strong correlation between GBP/USD and the direction of travel in interest rate expectations so any change in the BoE’s language or guidance, along the lines of the Federal Reserve will be able to help GBP recover, at least against the dollar," Geoff Yu, senior EMEA market strategist at BNY Mellon, wrote in a note to clients.

UK health minister says data looking good on easing lockdown

FOREX-Fed-fueled dollar rises as bears make for exits

(Reporting by Elizabeth Howcroft; editing by Philippa Fletcher)

((Elizabeth.Howcroft@thomsonreuters.com; +44 02075427104;))

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

Latest Markets Videos

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More