Sterling broadly steady ahead of workforce furlough scheme update

Reuters , Tuesday 12 May 2020

Sterling Banknotes
FILE PHOTO: British Pound Sterling banknotes are seen at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. (Photo: Reuters)

The pound rose slightly against the dollar in early London trading on Tuesday but fell versus the euro as Britain waited for announcements about the furlough scheme and how the UK's plans to ease lockdown measures will affect the workforce.

At 1130 GMT, the government is expected to announce changes to its employee furlough programme, which is paying the wages of more than 6 million workers at businesses affected by the coronavirus.

The government will also set out details on how to make workplaces safer as businesses start to return to work.

"The government in London has come under fire for its strategy for dealing with the pandemic," Commerzbank FX strategist Thu Lan Nguyen said in a note to clients, in which she advised them to be cautious over sterling.

"Not just the timing of the planned easing measures is attracting criticism; there is also considerable confusion about the extent of these measures," she added.

Versus the dollar, the pound edged up on Tuesday morning, having strengthened slightly overnight, but still down around 2% this month. It was last at $1.2343, up less than 0.1% since New York's close.

Against the euro, which had strengthened overnight, the pound was last down around 0.1% at 87.690 pence.

On Sunday, the government began to change its advice about the lockdown, with a televised speech by Prime Minister Boris Johnson, then a 51-page document on Monday detailing the plans, followed by a series of sector-by-sector documents for employers and workers.

A wide range of critics, however, said the details were nebulous and did not help people to know whether they should go back to work, how they would get there and how they could stay safe in the workplace.

Adding to the confusion, the leaders of Scotland, Wales and Northern Ireland made clear they did not share Johnson's approach and rejected his new core message, "stay alert", instead sticking to the previous "stay at home" slogan.

The UK has now overtaken Italy as the centre of the coronavirus crisis in Europe, with a death toll of over 30,000.

The market has turned increasingly short on the pound over the last 10 weeks, as concerns over the government's handling of the coronavirus crisis, which economists say leaves the country facing its worse recession in 300 years, are compounded by the risk of leaving the European Union without a deal at the end of the year.

Commerzbank's Nguyen said that a lack of government control over the coronavirus crisis does not bode well for its handling of Brexit.

Britain and the European Union started their penultimate scheduled round of trade talks via teleconferencing on Monday, having made little progress on any major sticking points. The UK insists it will not seek an extension to the transition period.

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