Sterling rises against weaker dollar as European countries ease lockdowns

Reuters , Wednesday 29 Apr 2020

Pound Banknotes
FILE PHOTO: Queen Elizabeth II is seen with printed medical masks on the Pound banknotes in this illustration taken, March 31, 2020. (Photo: Reuters)

The pound rose against the dollar on Wednesday as early moves to re-open economies around the world boosted risk appetite, causing the safe-haven dollar to lose ground.

France and Spain set out their plans to ease lockdown measures on Tuesday after Italy announced earlier in the week how it would re-open its economy.

"We're still seeing this ongoing improvement in risk sentiment," said Lee Hardman, currency analyst at MUFG.

He said that the Federal Reserve's policy response to the crisis will continue to weigh on the dollar, to the pound's benefit.

Sterling rose 0.2% against the weaker dollar, at $1.2443 . As the euro also strengthened versus the dollar, the pound was down around 0.3% versus the euro at 87.335 pence .

Hardman said he was broadly bullish on the pound, watching for the $1.25 level in the near term. A move towards $1.30 was possible later this year, if there was a broader dollar sell-off, he said.

Britain is expected to have one of the worst coronavirus death tolls in Europe, after data published on Tuesday showed nationwide fatalities topped 24,000 nine days ago.

The government has said it will not review social distancing guidelines until May 7.

"One potential downside risk for the pound would be it looks like the UK is at this stage lagging a bit compared to the other European countries in terms of unveiling plans to ease the lockdowns," MUFG's Hardman said.

"That has the potential, if the UK was to lag in the recovery, to become more of a pound-negative, but still... we anticipate to hear from the UK government in the coming weeks to nail more concrete plans to also roll back some of the lockdown measures." he said.

Meanwhile, negative economic data continue. The British Retail Consortium showed that British retailers cut prices of non-food items by the most since at least 2006 this month as they tried to shift stock they are struggling to sell because of the coronavirus.

Britain's environment minister said on Wednesday that thousands of British workers will need to help gather the harvest as seasonal workers from other parts of Europe are unable to travel.

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