Pounds Falls To One-Month Low As Edgy Investors Buy Dollars

Sterling touched a new one-month low against a robust dollar on Friday and also slipped to a one-month low against the euro as global risk aversion propelled investors towards currencies considered safer.

Risk currencies such as sterling have taken a knock this week on worries that the Delta coronavirus variant could derail the global recovery, boosting demand for the safe-haven dollar.

Concerns that major central banks such as the U.S. Federal Reserve will begin tapering emergency stimulus just as growth slows has also undermined risk sentiment.

Data released on Friday showed British retail sales unexpectedly fell sharply last month, but analysts said the pound was more likely to be driven by global risk sentiment than by the UK data.

Retail sales volumes dropped by 2.5% in July from June, official data showed. A Reuters poll of economists had pointed to a 0.4% month-on-month increase in July sales.

The British pound was last trading at $1.3623, having touched a fresh one-month low at $1.3614.

For the week, sterling was down almost 1.8% and set for its biggest fall against the greenback in two months.

Sterling also fell to a one-month low against the euro at 85.82 pence and was marginally lower on the day.

It has weakened almost 0.9% versus the common currency this week, which means it is on track for its biggest weekly drop since early April, according to Refinitiv data.

“With the markets priced for Bank of England action in 2022 certainly the pound will remain vulnerable to an extension of risk-off that starts to result in investors questioning the ability of G10 central banks to raise rates at all,” Derek Halpenny, head of research, global markets EMEA at MUFG, said in a note.

“But we don’t think we are at that juncture yet.”

– Reuters