Sterling hits 2½-month high against euro

UK currency trading at 85.35p against euro, highest since early April

The new £50 UK banknote, featuring an image of wartime code breaker Alan Turing. Sterling has been among the top performing G10 currencies this year on bets that Britain’s economy will reopen quicker than peers. Photograph: PA Wire/Bloomberg

The new £50 UK banknote, featuring an image of wartime code breaker Alan Turing. Sterling has been among the top performing G10 currencies this year on bets that Britain’s economy will reopen quicker than peers. Photograph: PA Wire/Bloomberg

 

Sterling hit a 2½-month high against the euro on Wednesday and gained for a third straight session against the dollar, continuing a recovery after it fell in the wake of last week’s Federal Reserve meeting.

Recent movements in sterling have been dollar-driven, as investors price in earlier than expected asset purchase tapering from the Federal Reserve, after the US central bank signalled last week higher rates in 2023.

In early trade, sterling was 0.3 per cent higher at $1.3979. It was also up 0.3 per cent against the euro at 85.35 pence, its highest level since April 6th.

Investors were also keeping an eye on the release of UK flash purchasing managers indexes for June due to gauge business activity and planning.

“In the UK, the focus is on June PMIs,” ING strategists said in a morning note. “We may see a slight increase in the services index again, though manufacturing PMIs may reverse lower modestly after their meaningful rise last month.”

Overvalued

“GBP has recently started recovering some ground vs EUR but despite this, EUR/GBP still screens as modestly overvalued based on our short term financial fair value model.”

Britain has delayed the final phase of its economy’s reopening by a month to July 19th. Prime minister Boris Johnson has said the extra time would be used to speed up the country’s vaccination programme.

Sterling has been among the top performing G10 currencies this year on bets that Britain’s economy will reopen quicker than peers due to the country’s Covid-19 vaccination programme. About 80 per cent of Britain’s adult population has received a first dose. – Reuters