By Yumna Mohamed
LONDON, Nov 2 Sterling rose to a two-week high on Wednesday against a dollar weakened by uncertainty about the U.S. presidential election, as investors largely ignored encouraging data on British construction.
The battered pound has recovered almost 1 percent this week , boosted by news that Bank of England Governor Mark Carney will extend his tenure to 2019.
Carney’s decision eased concern about threats to the Bank’s independence in an uncertain political environment, where worries over a “hard” UK exit from Europe’s single market have sent sterling tumbling.
The currency built on its gains on Wednesday, climbing as much as a third of a percent to $1.2285, its highest since Oct. 20, against a dollar that was lower across the board on concern that Donald Trump would win the U.S. presidential election.
“That is more about the slight weakness in the dollar than any great strength in sterling,” said Richard Wiltshire, chief FX broker at ETX capital. “Brexit is the primary driving force at the moment. Any rallies in sterling are capped by the fear of the unknown.”
The pound barely reacted to the latest purchasing managers’ construction index, which showed growth hitting a seven-month high in October. Political jitters have mostly overshadowed economic data in recent months.
An equivalent survey of Britain’s dominant services sector is due on Thursday.
Investors are also looking to Thursday’s BoE policy decision and quarterly inflation report. Sterling’s fall – almost 20 percent since the vote for Brexit – is expected to push the BoE to raise its inflation forecasts to show a bigger overshoot of its price target than at any time since it gained independence in 1997.
Against the euro, the pound was steady at 90.33 pence.
“The scale of pound depreciation has over-extended and the longer we stabilise around current levels, the greater the risk becomes that we will see a liquidation of short sterling speculative positions and a recovery of the pound against both the dollar and the euro,” wrote Derek Halpenny, the Bank of Tokyo-Mitsubishi UFJ’s head of global markets strategy. (Reporting by Yumna Mohamed; Editing by Larry King)
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