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Sterling rebounds above $1.21, set for biggest daily gain in three years

Reuters | Updated: 26-03-2020 22:21 IST | Created: 26-03-2020 22:21 IST
Sterling rebounds above $1.21, set for biggest daily gain in three years

Sterling was on track for its biggest daily gain in three years on Thursday, rebounding more than 2% as grim U.S. unemployment data weakened the dollar across the board.

The pound was last trading above $1.21, after falling as low as $1.14 last week, levels not seen since 1985. It is heading for its best week since 2009, up 4% since Monday. Sterling has been hammered in recent weeks as fears about the economic impact of the coronavirus pandemic sent investors scrambling for dollars - the world's most liquid currency and one seen as a safe haven in times of crisis.

The U.S. currency lost some ground against major currencies on Thursday after data showed an unprecedented surge in Americans filing for unemployment benefits, as firms shut down in an attempt to stem the spread of the virus. Despite its recent rally, the pound is still down nearly 11 cents from its early March high of $1.32.

Earlier on Thursday the Bank of England said it was prepared to take further action to limit the economic fallout from the outbreak in Britain and held benchmark rates at rock-bottom levels. The BoE, which made two emergency rate cuts and ramped up its bond-buying programme earlier this month, promised more asset purchases if needed to stop a coronavirus-related shutdown from plunging the country into a long recession.

Finance minister Rishi Sunak is expected later on Thursday to detail how he plans to support Britain's 5 million self-employed workers through the crisis. The pound was last up 2.3%, changing hands at $1.2145. .

Against the euro the pound was up 1% at 90.775 pence . A $2 trillion stimulus package agreed by U.S. politicians to shield the world's biggest economy and co-ordinated action by central banks including the BoE to boost the supply of dollars have helped ease stress in money markets and some of the selling pressure on the British currency.

Analysts say sterling's fortunes are tied to broader market sentiment, which has improved markedly in recent days as investors cheer the stimulus plans. "Sterling will continue to trade mainly based on global market sentiment," said Antje Praefcke, an analyst at Commerzbank.

On Wednesday, the pound swung from $1.1971 to $1.1640 within a few hours, showing how volatile trading conditions remain. Implied sterling-dollar volatility is down from last week's long term peaks but remains high, suggesting further big moves could be in store.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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