LONDON: Sterling rebounded against the dollar and euro on Monday as risk sentiment across markets recovered after jitters over global growth sparked a sell-off last week.

The pound gained 0.7pc against the broadly weaker dollar, taking it back above $1.37, after it swung 1.8pc lower the previous week.

Against the euro, the pound was up 0.4pc at 85.55 pence.

Sterling was coming off its worst week in two months against both currencies, amid concerns the Delta coronavirus variant could derail the global recovery and worries major central banks will quickly taper emergency stimulus.

The improvement in sentiment was reflected in equity markets, with stocks gaining across global markets on Monday.

Pound set for worst week in months as global jitters boost dollar

The pound strengthened despite 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.

"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," Charalambos Pissouros, head of research at JFD Group, said 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.