Sterling Near Three-Week Highs Before Government Releases Spending Plans

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Sterling held near a three-week high against the dollar and gained against the euro on Tuesday as investors waited for more details of the government’s plans to support the British economy.

Chancellor Rishi Sunak will make a speech on spending on Wednesday, with more measures seeping out since Prime Minister Boris Johnson announced five billion pounds of infrastructure investment seven days ago.

Sunak is considering handing out vouchers of £500 ($624) for adults and £250 for children, to spend in sectors of the economy hit hardest by the coronavirus crisis, the Guardian said on Sunday.

“Prime Minister Johnson’s so-called New Deal for infrastructure spending was deemed insufficient and so UK business interests are urging Sunak to be more aggressive,” said Brown Brothers Harriman analysts in a note.

Against the dollar, the pound was lower at $1.2475 but within striking distance of a June 18 high of $1.2568. Against the euro, it rose 0.1% to 90.49 pence.

Despite the pound’s gains, some investors remained cautious about the currency’s outlook. Positioning data showed hedge funds increasing their bearish bets on the British pound, as the UK and European Union try to reach a trade agreement in their Brexit negotiations.

That caution was evident in the price action with the pound struggling to make headway above $1.25 on three previous occasions.

“The pound will likely be caught in no man’s land throughout this week and will simply take its cue from broad dollar sentiment,” strategists at Scotiabank said in a note.

– Reuters.

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