July 17, 2020 / 8:42 AM / 21 days ago

Pound set for biggest weekly fall in a month, economic gloom weighs

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

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

LONDON, July 17 - The pound eased slightly in early London trade on Friday, set for its biggest weekly fall versus the dollar in a month, as uncertainty over Britain’s economy, difficult Brexit talks and a heavy COVID-19 death toll weighed on the currency.

The pound is on track to be the worst performing G10 currency this week, after weaker economic data raised concerns over the possibility the Bank of England will introduce negative interest rates.

“The pound has had a slightly more negative week over concern that weaker data will prompt further action on the rates front from the Bank of England at its September meeting,” wrote Michael Hewson, chief market analyst at CMC Markets UK.

The government’s chief scientific advisor said on Thursday Britain had not achieved a good outcome in dealing with the COVID-19 pandemic and he was sure mistakes had been made. Britain has the highest COVID-19 death toll in Europe.

With British gross domestic product data for May rising less than expected, investors are questioning whether the fiscal stimulus measures already announced will be enough to prop up the economy.

Fewer British workers lost their jobs in June, official data on Thursday showed, but economists said unemployment was still expected to jump.

“Activity data have generally disappointed this week, but as the data flow dries up and trade talks reopen next week, expect Brexit to come back to the fore as a driver of GBP,” wrote Adam Cole, chief currency strategist at RBC Capital Markets.

The pound was slightly weaker versus the dollar after strengthening slightly at the end of the previous session on news U.S. retail sales beat estimates.

At 0810 GMT sterling was at $1.2542, down 0.7% on the week and set for its biggest weekly fall in a month.

Versus the euro, it slipped slightly to 90.785 pence per euro.

The Bank of England’s governor, Andrew Bailey, will speak at 1000 GMT.

MUFG strategist Derek Halpenny wrote that Britain faced a “possible extreme period of dire sentiment” as the government plans to phase out its expensive job retention programme and investors fear it will manage only a poor trade deal with the European Union.

“The BoE will be unable to sit on the sidelines and watch,” he added.

In Europe, investors are focused on an EU summit on Friday and Saturday when leaders will discuss the proposed 750 billion euro EU-wide coronavirus recovery fund. ($1 = 0.8783 euros) (Reporting by Elizabeth Howcroft; editing by Barbara Lewis)

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