Sterling Cuts Weekly Losses With Afternoon Bounce

The pound sterling cut serious weekly losses on Friday thanks to an afternoon recovery as sentiment in global financial markets improved, leading to the withdrawal of risky currencies and encouraging investors to leave the US dollar safe haven.

The pound hit its lowest level in a year earlier this week, weakened by a shortage of truck drivers in the UK and rising energy prices, while a hawkish look from the US Federal Reserve and concerns about Chinese economic growth propelled the dollar higher.

“It was kind of a perfect storm for the pound sterling,” said Keith Jukes, chief currency strategist at Societe Generale SA, adding that the move was “partially reversed” on Friday.

While the markets lived up to their expectations for the Bank of England to raise interest rates, the likely tightening of monetary policy failed to support the currency.

“It was another gloomy week for the pound, which remained very sensitive to fluctuations in sentiment and was still struggling to cash in on the recent hawkish reappraisal of the Bank of England rate expectations,” said Francesco Pesole, strategist at ING.

The pound on Friday rose 0.63 percent against the US dollar to hit 1.3562 and 0.5 percent against the euro to hit 0.8550 pounds sterling.

Sterling recorded a weekly 0.8 percent drop against the US dollar, a tangible improvement from the 1.5 percent weekly drop it approached in early morning trading.

In Taipei, the New Taiwan dollar fell against the dollar, shedding Taiwanese dollar 0.016 to close at Taiwan dollar 27.882, down 0.5 percent over the week.

The British pound was one of the strongest G10 currencies earlier this year, as investors bet the UK economy will recover faster from the COVID-19 pandemic thanks to an early UK vaccination program.

Since then, however, that narrative has collapsed, and the pound sterling has erased all of its strong gains and turned into annual losses.

Many UK gas stations were still dry on Friday after a chaotic week of panic buying, pump fights and drivers piling up fuel in water bottles after an acute shortage of truck drivers strained supply chains to the limit.

The shortage of workers after Brexit and the pandemic has wreaked havoc in some sectors of the economy, disrupting the supply of fuel and medicine and leaving up to 150,000 pigs on farms.

“The current gasoline crisis underscores the impact of Brexit, however [British] Prime Minister Johnson is trying to make all of this sound positive, ”Antje Prefke, an analyst at Commerzbank AG, wrote in a morning note.

Data released by the UK Office for National Statistics showed that while the economy grew more than previously estimated between April and June, it should have slowed as post-lockdown bottlenecks, including a shortage of truck drivers, undermine economic growth. recovery.

Additional reporting by CNA

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