Sterling rises ahead of UK job data

LONDON: Sterling rose 0.2 percent against a slightly stronger dollar yesterday ahead of UK unemployment and GDP data this week after hitting its biggest daily fall since June against the greenback on Friday. Sterling resumed its role as a risk-driven currency on Friday, with a sharp fall against the dollar as global investors sentiment turned sour amid more friction between China and the United States.

The British currency rose 0.2 percent $1.3053 at 0900 GMT yesterday against a slightly stronger dollar with investors also focusing on fiscal stimulus in the United States.

Versus the euro, sterling gained 0.2 percent at 90.05 pence per euro. The pound was still below a five-month high of $1.3185 touched last week when it rose to a five-month high on Thursday as the Bank of England struck a less pessimistic tone about the coronavirus-battered British economy.

ING analysts said it is not the case of being too optimistic on sterling as consensus expects a rise in the June unemployment rate from 3.9 percent to 4.2 percent. “GBP could not hold on to last Thursday’s BoE (Bank of England)-inspired gains and instead is consolidating ahead of key employment data released tomorrow,” analysts at ING wrote in a note.

“We prefer not to chase the story of upside surprises in UK activity nor a stronger GBP”.

Speculators’ net short position on the pound got smaller in the week to August 4, weekly CFTC positioning data showed . “Speculators are still short GBP and while a short squeeze is still possible, we prefer not to chase the story of upside surprises in UK activity nor a stronger GBP,” the ING analysts added.

Britain’s finance minister Rishi Sunak said on Friday that extending a furlough scheme which is due to expire at the end of October would leave some workers trapped in the false hope that they could return to their jobs after the pandemic. UK second-quarter GDP data is also due this week. — Reuters