Sterling sank on Wednesday as profit-taking by traders after a strong first quarter for the British currency pulled it to a week’s low against the dollar and its lowest in two weeks against the euro.
The pound fell on Tuesday, losing 0.6% against the dollar and over 1% against the euro – its worst day against the single currency in five weeks as investors took cash off the table.
By 0803 GMT on Wednesday, the pound was down 0.14% against the dollar at 1.3802, having hit a one-week low of $1.3773 in early deals. It traded 0.15% lower to the euro at 86.03 pence.
Market participants still expected limited losses for the pound. Some also cite seasonal factors such as the end of the tax year in Britain, for expectations that it will appreciate.
“Sterling corrected lower yesterday, possibly amid some profit-taking following a solid first quarter,” said Francesco Pesole, FX strategist at ING.
“But fundamentals – above all, upbeat recovery expectations thanks to the vaccine-backed reopening of the UK economy – remain strong and should limit the scope for further short-term GBP downside.”
Expectations of an economic rebound in Britain, spurred by rapid COVID-19 vaccinations, helped sterling to record its best quarter since 2015 versus the euro.
With the vaccine programme rolling out rapidly across Britain and infection numbers falling, Prime Minister Boris Johnson confirmed on Monday a planned re-opening of the economy would take place next week.
Shops, gyms, hairdressers and outdoor hospitality areas in England will re-open. The government is also looking at a COVID-status certification system, or vaccine passport, to help re-open larger events.
Britain will begin the rollout of Moderna’s COVID-19 vaccine in mid-April, vaccine deployment minister Nadhim Zahawi said on Tuesday, adding the inoculation programme was on track to meet government targets.
– Reuters