Left Menu
Development News Edition

Sterling rises but traders say gains unlikely to last

Reuters | London | Updated: 15-08-2019 16:13 IST | Created: 15-08-2019 16:02 IST
Sterling rises but traders say gains unlikely to last
Image Credit: Flickr

Sterling was higher on Thursday, boosted by better-than-expected retail sales and news that Britain's opposition Labour Party had begun its bid to bring down Prime Minister Boris Johnson with a vote of no confidence.

Higher July inflation, posted on Wednesday, also contributed to the investors' optimism. Market participants have also been trimming their expectations of further weakness in the pound, judging by prices in the derivatives market.

However, analysts say it is unlikely that sterling will rise much further given the growing risk of Britain crashing out of the European Union without a divorce deal in October. Retail sales went up by 0.2% month-on-month in July, a smaller increase than in June, when they rose by 0.9%, but higher than a Reuters poll was forecasting, which was a 0.2% fall. The month-on-month increase in June was revised down from 1%. Year-on-year sales went up by 3.3% compared with a 3.8% rise in the previous month.

Marshall Gittler, the chief strategist at ACLS Global, said the slowdown in sales "suggests to me that consumers are getting nervous ahead of Brexit," adding that this should be negative for the pound. This week inflation rose unexpectedly to 2.1% in July, which could have prompted the Bank of England to signal interest rate rises, but this time it "will likely prove insufficient to support the pound much above the 1.2050 level," said Fritz Louw, a currency analyst at MUFG.

The pound was last up by 0.4% at $1.2107, having touched briefly a one-week high of $1.2113 earlier, but remains close to the 31-month low of $1.2015 it reached on Monday. Against the euro, the pound was up by 0.2% at 92.14 pence, retreating from the 10-year low of 93.26 pence it plunged to on Monday. The cost of protection against unexpected moves in the currency, seen in the three-month options pricing, eased a bit from a seven-month high. Three-month risk reversals, which encapsulate the Brexit deadline, paint a similar picture.

The small uptick came from the news that opposition leader Jeremy Corbyn has started to gather support for a no-confidence vote in the current government. This was seen by some investors as confirmation that parliament is ready to do all it can to avert a no-deal Brexit. Though most analysts still see a no-deal exit more likely.

Johnson has promised to take Britain out of the European Union by Oct. 31, with or without a deal, setting the scene for a showdown in parliament where lawmakers are opposed to divorce without a transition agreement.

Also Read: UK's opposition Labour Party open to a Scottish independence referendum - McDonnell


TRENDING

OPINION / BLOG / INTERVIEW

5G will be the key driving force for COVID-19 recovery: Here's how?

... ...

Canada’s COVID-19 pitfalls highlight need for integrated health information system

In the globalized world of today where outbreaks can spread far and wide within a matter of days, a global-level integrated health information system is ideal but Canadas provincial barriers show that the country lags much behind in deployi...

Pandemic must be impetus, not obstacle, for clean water access

To make matters worse, there are suspicions that the inadequacy of wastewater treatment methods in California, the rest of the USA, and indeed around the world may help to propagate the disease even more widely. ...

3D printing and the future of manufacturing post COVID-19

The on-demand, customizable, and localized manufacturing of product components facilitated by 3D printing has the potential to redefine manufacturing but there are certain technical, mechanical, and legal limitations that, unless ...

Videos

Latest News

Andhra Pradesh CM reviews work of Amravati development authority

Andhra Pradesh Chief Minister YS Jaganmohan Reddy reviewed the work of the recently renamed Amaravati Metropolitan Region Development Authority AMRDA on Thursday. During the meeting, the Chief Minister enquired about the status of construct...

MLAs engage in wordy duel over riots in Bengaluru

A war of words between Chamarajpet Congress MLA B Z Zameer Ahmed Khan and Krishnaraja BJP MLA S A Ramadass broke out over the riots in Bengaluru which left three dead in police firing. Condemning the violence, Khan, in a tweet, insisted on ...

One person killed in house collapse in Mumbai's Chembur area: Official.

One person killed in house collapse in Mumbais Chembur area Official....

Israeli hospital trials super-quick saliva test for COVID-19

A newly developed saliva test aims to determine in less than a second whether or not you are infected with the novel coronavirus, Israels largest medical center said on Thursday. Patients rinse their mouth with a saline wash and spit into a...

Give Feedback