LONDON: Sterling edged up against the dollar and was flat against the euro on Monday as risk sentiment across markets recovered somewhat after jitters over global growth sparked a broad selloff last week.
Concerns that the Delta coronavirus variant could derail the global recovery and worries major central banks will taper emergency stimulus sooner boosted the safe haven dollar last week at the expense of most major rival currencies.
Sterling had its worst week in two months against both the dollar and euro as traders sold off assets perceived as riskier.
The pound clawed back some of its lost ground against the dollar on Monday, gaining a third of a percent, but was still pinned below $1.37. Sterling had swung 1.8% lower against the dollar last week.
Against the euro, sterling edged up 0.1% at 85.79 pence.
The improvement in sentiment was reflected in equity markets, with European stocks gaining ground in early trading.
The pound was little changed by survey data published Monday morning 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.
“Last week, the pound tumbled against the greenback at a time when the financial world turned to risk off due to concerns over the spreading of the Delta coronavirus variant,” said Charalambos Pissouros, head of research at JFD Group, in a note.
“Perhaps market participants consider the pound as a risk-linked currency due to the UK’s large current account deficit.”
Pissouros added that the pound could fare better than rivals in the coming months if the Bank of England tapered policy quicker than other central banks.
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