LONDON, Jan 5 — The British pound steadied today but held well below a more than 2-1/2 year high of US$1.37 (RM5.50) hit in the previous session as a new lockdown deflated post Brexit-deal optimism.
Prime Minister Boris Johnson ordered England into a new national lockdown to contain a surge in Covid-19 cases that threatens to overwhelm parts of the health system before a vaccine programme reaches a critical mass.
The new measures which could cost about 10 per cent of economic output for as long as they last, according to some analysts, deflated any lingering bullishness around the British currency and sent it tumbling one per cent from the May 2018 highs.
“The successful conclusion of the Brexit talks offered just a momentary breather with the pound back into the dumps after Johnson ordered a third economically disastrous national lockdown for England,” said Marshall Gittler, a strategist at BDSwiss Group.
In early London trading, the pound was trading at US$1.3560, up 0.1 per cent versus a broadly weak US dollar. Against the euro, the pound was 0.4 per cent weaker at 90.51 pence.
The expected hit on the economy heaped up expectations on the Bank of England to announce more policy easing.
Money markets now expect the central bank to cut benchmark interest rates as early as May compared with an August estimate just after the Brexit deal was struck.
The pound had strengthened against both the dollar and euro after the December 24 Brexit trade deal, which set rules for fishing, agriculture and other industries.
Despite the pound’s gains in recent days, market participants are not bullish on the currency’s prospects. Net long bets on the pound against the US dollar are a fraction of what they were at their 2020 highs. — Reuters
Source: Malay Mail
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