By Ritvik Carvalho
LONDON – Sterling edged lower against the dollar on Tuesday, but held most gains made against the greenback on the back of a risk rebound at the start of the week that saw the British currency bounce nearly 1%.
The pound has traded roughly in line with risk sentiment in global markets, and a recovery in world stock markets on Monday helped give it a leg up after a nearly 2% loss last week – its worst in 2 months.
By 0818 GMT on Tuesday, sterling was 0.2% lower to the dollar at $1.3697, but still holding on to its Monday bounce.
Against the euro, it was 0.1% lower at 85.68 pence.
“What we saw yesterday was the pound, along with other high-beta G10s, riding on the coattails of the positive sentiment seen in global equity markets, a sharp contrast to last week,” said Michael Brown, senior market analyst at Caxton FX.
“This morning, the market is in consolidation mode, unsurprising really after the big rally seen yesterday. I think we’re now looking to Powell’s Jackson Hole speech on Friday for the market’s next impetus, though expectations for a hawkish shift do appear to have been dialled back over the last few sessions.”
Speculators reduced their net long position on the pound in the week up to last Tuesday, CFTC data showed on Friday. This means that speculators are less bullish on the currency than they were earlier. [CFTC/] [IMM/FX]
On Monday, survey data published showing Britain’s post-lockdown economic rebound slowed sharply in August, as companies struggled with unprecedented shortages of staff and materials.
The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sliding to 55.3 from 59.2 in July – a sharper slowdown than economists had forecast.