Sterling steadies around $1.38 after England sets reopening plans

LONDON: Sterling steadied versus the dollar and the euro on Wednesday after hitting a one week high against the greenback and a 12-day high against the single currency this week as Britain set out reopening plans following the COVID-19 pandemic.

Sterling was 0.1% higher versus the dollar at $1.3815 by 1320 GMT, after rising on Tuesday to its highest since June 28 at $1.3898.

Versus the euro, it was 0.2% higher at 85.50 pence, after jumping to a 12-day high of 85.36 pence in the previous session.

Sterling shines against dollar

Analysts said sterling had found support this week on British Prime Minister Boris Johnson's plans to end social and economic COVID-19 restrictions in England.

"The UK government's decision to go ahead with a further easing of restrictions on 19 July has endorsed the market's relatively relaxed stance towards the recent flare-up in COVID-19 cases in the country," ING analysts wrote in a note to clients.

But investors remained cautious as the government also warned that the number of coronavirus cases could climb as measures are relaxed.

Britain reported the highest daily number of new COVID-19 cases since Jan. 29 on Tuesday, and the greatest number of deaths within 28 days of a positive test since April 23.

The government is hoping that cases will climb without a resulting increase in deaths, as a large part of the population has received a vaccine.

"Sterling bulls are unlikely to pile back on the currency until the results of the government's policy are known," said Shaun Osborne, Chief FX Strategist at Scotiabank.

Sterling has been among the top performing G10 currencies this year following Britain's quick vaccination rollout.

Those gains have evaporated in recent weeks as other countries implemented successful vaccination programmes and as the Federal Reserve hinted at an earlier than expected end to easy monetary policy, giving the dollar a boost.

Another reason for the recent leg lower in the pound was a warning by Bank of England governor Andrew Bailey against an overreaction to inflation in Britain.