Advertisement
Advertisement

Pound posts first weekly rise in four weeks

By:
Reuters
Updated: Jun 24, 2022, 15:36 UTC

By Lucy Raitano LONDON (Reuters) - Sterling edged up against the dollar on Friday and was set for its first weekly rise in four weeks, as a weaker greenback and better-than-expected retail data allowed investors to look past mounting pressure on British Prime Minister Boris Johnson.

File photograph shows an employee walking over a mosaic depicting pound sterling symbols on the floor of the front hall of the Bank of England in London

By Lucy Raitano

LONDON (Reuters) -Sterling posted its first weekly gain in four weeks against the dollar on Friday, ticking up as a weaker greenback and better-than-expected retail data allowed investors to look past mounting pressure on British Prime Minister Boris Johnson.

Data on Friday showed retail sales volumes in May fell by 0.5% on the month, a slightly smaller decline than the 0.7% drop expected by economists polled by Reuters.

By 1446 GMT, the pound rose 0.24% against the dollar at $1.22915 and flatlined against the euro at 85.825 pence.

The currency is up 0.59% on the week to the dollar.

It was not much affected by news that Johnson’s Conservatives had lost two parliamentary seats, a crushing blow to the governing party that prompted the resignation of the party’s chairman.

Johnson – whose authority has been battered by revelations of lockdown-breaking party’s at his Downing Street office during the COVID-19 pandemic – recently survived an effort to topple him as party leader and according to rules, another confidence vote cannot be held for a year.

“Boris Johnson is under huge pressure because of ‘partygate’ and the bad election results,” said Mikael Olai Milhøj, Chief Analyst at Danske Bank.

“If that means he pushes much more forward on issues like the Northern Ireland protocol, we could see investors start to re-price Brexit risk premiums, but we are not there yet.”

Meanwhile, the retail sales decline comes after Thursday’s PMI numbers for June, which showed a composite reading of 53.1, above the median forecast of 52.6.

“High inflation, rising recession fears and central bank tightening are more important than domestic data readings,” said Milhøj.

On Friday afternoon, Bank of England Chief Economist Huw Pill said that interest rates would remain the central bank’s main monetary policy tool as it prepares to start selling bonds, reversing part of its economic stimulus push.

Pill was one of a six-strong MPC majority that voted for a 25 basis points (bps) rate hike last week. Three other MPC members voted for a 50 bps hike.

“It’s an extremely difficult balancing act, they have to try to not create a deep downturn while getting inflation under control, that’s going to be very difficult,” said Kenneth Broux, an FX strategist at Societe Generale.

A lot of bad news is already “baked in” to sterling, according to Broux, with the currency mostly reacting to dollar weakness caused by traders scaling back where U.S. interest rates may peak.

(Reporting by Lucy Raitano; Editing by Alex Richardson)

About the Author

Reuterscontributor

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV. Learn more about Thomson Reuters products:

Did you find this article useful?

Advertisement