Sterling steadies

SYDNEY- Sterling steadied on Tuesday, but was perched above its record low only thanks to soaring yields on British debt and the hope of a response from policymakers or politicians, with its gyrations unnerving markets to the benefit of the dollar.

On Friday and again on Monday the pound plunged, finding a record low of $1.0327 as investors question Britain’s economic gambit of unfunded tax cuts to spur growth.

It has bounced back to $1.0770, helped by the Bank of England promising to monitor markets and hike if necessary, and a bloodbath in gilts that has driven an incredible 100 basis point rise for two-year yields in just two trading days.

“We should expect the pound to remain volatile in the week ahead as market participants await to see how policymakers in the UK respond to the loss of confidence in the pound and gilts,” said Lee Hardman, currency analyst at MUFG Bank.

“Without timely policy action this week cable could quickly fall below parity.”

Sterling has dropped 5 percent since Thursday and 21 percent this year against a backdrop of an ever stronger dollar.

The greenback has climbed as expectations solidify for US interest rates staying higher for longer, and as sudden moves like the pound’s rattle traders. As the pound fell on Monday, the dollar surged to new highs on the euro and many more.

“Everyone’s got this hope that the dollar is peaking and peaking and peaking, but it’s just been far too premature,” said Paul Mackel, global head of FX research at HSBC in Hong Kong. “‘ Reuters

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