LONDON (Reuters) - Sterling dipped against the dollar on Monday as rising U.S. Treasury yields put the greenback in demand, with investors cautious about the easing of coronavirus lockdown measures in Britain.
As several countries moved to reopen their economies with a gradual easing of lockdown measures, risk sentiment recovered in markets, giving stock markets a boost. The yield on the U.S. 10-year Treasury bond rose to 0.7036%.
Sterling rallied briefly in Asian trading after Prime Minister Boris Johnson set out a cautious plan on Monday to get Britain back to work, but sank during trading in London as his message prompted confusion and even satire.
Viraj Patel, FX and global macro strategist at Arkera, said the pound had got off to a mixed start for the week, with little lasting impact from Johnson’s announcement. “Instead, the dollar remains supported by rising U.S. yields,” he added.
Sterling was last 0.7% lower at $1.2324, having earlier slipped below $1.23. Against the euro, it was 0.4% lower at 87.71 pence.
The government published a 51-page document including a staged undertaking to allow businesses to reopen, advice on avoiding public transport and wearing face coverings, as well as an 14-day quarantine for most international arrivals.
There was a lack of specific detail, though, on what employers should do to ensure the safety of workers and the leaders of Scotland, Wales and Northern Ireland said they were sticking with the existing “stay-at-home” message.
“Prime Minister Boris Johnson’s speech had a muted impact on the pound, with markets focusing on the lack of clarity rather than the slow journey towards the reopening of the economy,” ING strategists said in a research note.
“As risk appetite is likely to stay supported this week (no clear risk events on the horizon and declining expectations of an imminent escalation in US-China trade tensions), this suggests a neutral outlook for sterling-dollar, with the cross staying in a tight range of $1.2240-$1.2520.”
ING also noted the increase in short positioning on the pound in the latest CFTC data along with rising uncertainty about UK-EU trade negotiations.
Britain’s economy has reeled from the pandemic, while Brexit talks continue with little progress on major sticking points before a June deadline to agree on any extension of negotiations.
The Bank of England last week held interest rates steady at its meeting and announced no further stimulus, although it said it was ready to take further action to counter the coronavirus pandemic’s fallout.
Its chief economist Andy Haldane said there was a risk that the pandemic would cause a long-term hit to spending by companies saddled with higher debts and by households worried about their job prospects.
British retailers have warned the government that its business bailout package of reliefs, grants and loans will not be sufficient to stop the “imminent collapse of many businesses”.
First quarter GDP figures will be released for the UK on Wednesday this week.
Reporting by Ritvik Carvalho; Editing by Peter Graff and Catherine Evans