Sterling Sinks to 5-Week Low vs. Euro, One-Week Low vs Dollar

By Ritvik Carvalho

LONDON (Reuters) -Sterling sank on Wednesday as profit-taking by traders after a strong first quarter for the British currency pulled it to a week’s low against the dollar and its lowest in two weeks against the euro.

The pound fell on Tuesday, losing 0.6% against the dollar and over 1% against the euro – its worst day against the single currency in five weeks as investors took cash off the table.

By 1305 GMT on Wednesday, the pound was down 0.43% against the dollar at 1.3761, having hit a one-week low of $1.3756. It traded 0.5% lower to the euro at 86.38 pence.

“The recent FX price action seems to suggest that many positives are in the price of the GBP by now and that the pound is looking quite overbought (especially in the case of EUR/GBP),” said Valentin Marinov, head of G10 FX research at Credit Agricole.

“Moreover, the GBP has recently lost its crown of a ‘G10 vaccine champion’ and, more broadly, the slowing pace of the COVID vaccinations in the UK could ultimately delay the government’s plans to reopen the economy despite the recent proclamations of PM Johnson.”

Marinov added that according to the latest polls, the upcoming local elections in Scotland could give a supermajority to the pro-independence parties – the Scottish National Party, the Greens and the newly formed Alba party.

“Given all these downside risks, we maintain our cautious medium-term outlook for the pound.”

Expectations of an economic rebound in Britain, spurred by rapid COVID-19 vaccinations, helped sterling to record its best quarter since 2015 versus the euro.

Britain began using Moderna’s COVID-19 vaccine on Wednesday in Wales just as its rollout of other shots fell to their lowest level this year due to a supply crunch caused by manufacturing problems at AstraZeneca.

Britain has surged ahead of the rest of Europe in the race to vaccinate its population, with almost half of its citizens receiving a first dose. But supply issues from its main Oxford-AstraZeneca shot have slowed progress in recent days.

Prime Minister Boris Johnson confirmed on Monday a planned reopening of the economy would take place next week.

Shops, gyms, hairdressers and outdoor hospitality areas in England will reopen. The government is also looking at a COVID-status certification system, or vaccine passport, to help reopen larger events.

(Reporting by Ritvik Carvalho; editing by Larry King and Bernadette Baum)