Sterling edges higher ahead of Sunak's speech

LONDON: Sterling edged slightly higher on Thursday ahead of an eventful day, with finance minister Rishi Sunak expected to unveil a new set of measures to support the COVID-hit economy.

Sunak, who announced on Wednesday that he would not now set out a full budget later this year, was expected to unveil a lifeline to some furloughed workers in a speech around 1045 GMT.

Against the euro, the pound was up 0.2pc at 91.39 pence by 0951 GMT. Versus the dollar, sterling was flat at $1.2729, after hitting a two-month low of $1.2676 on Wednesday.

Investors expect more stimulus but "if he (Sunak) disappoints you may see a reaction on UK markets", said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

"The picture is similar to the US where we are talking of the need for more fiscal stimulus."

Investors were also looking for hints whether the Bank of England intends to cut interest rates below zero.

"With BoE governor Andrew Bailey also due to speak again later today, it could well be another choppy day for the pound, with the concern about negative rates still fresh in the market's memory," wrote Michael Hewson, chief market analyst at CMC Markets UK.

Sterling has lost 4.8pc against the dollar in September so far, and is on course for its worst month since October 2016, as talks of negative rates, the looming risk of a no-deal Brexit and new UK lockdown measures all weighed on the currency.

Earlier this week, Prime Minister Boris Johnson told British people to work from home where possible and ordered restaurants and bars to close early.

The new measures could last for six months, he said.

But supporting sterling, hopes returned that the European Union and Britain could reach a Brexit trade agreement by the end of a transition period in December after two of the most powerful players in the negotiations said they were determined to strike a deal.