Pound Recovers as Drop to Lowest Level in a Month Entices Buyersby
Sterling climbs versus euro as London house prices rebound
Buyers encouraged after pound fell below $1.30: Santander
The pound appreciated against the dollar, recovering from a decline that saw it slide to a one-month low.
Sterling also rose against the euro, after dropping on Friday by the most in six weeks, as Chancellor of the Exchequer Philip Hammond was said to be ready to accept that Britain may have to give up membership of the European Union’s single market after Brexit. The pound was undermined last week when the Bank of England maintained its monetary policy while indicating there’s a chance of another interest-rate cut this year. Faster-than-forecast inflation in the U.S. supported the dollar on Friday.
“I imagine the motivation is that sterling’s probably not going to go much lower today” so traders decided to buy it, said Stuart Bennett, head of Group-of-10 currency strategy in London at Banco Santander SA. The pound’s “gone down below the $1.30 level in Asian trading so as people came in they thought this could be a good level” to buy it, he said.
The pound climbed 0.5 percent to $1.3060 as of 4:30 p.m. London time, after falling 1.8 percent on Friday, its biggest drop since July 5. It touched $1.2996 earlier on Monday, the lowest since Aug. 17. The British currency appreciated 0.2 percent to 85.62 pence per euro.
The pound has shown signs of stabilizing as data signaled that the economy was proving to be more resilient since the June 23 decision to leave the EU than many analysts had predicted, prompting traders to reduce wagers that the BOE will move this year.
Hedge funds and money managers trimmed net bearish positions on pound futures for the third week, according to data from the Commodity Futures Trading Commission. Bets that sterling would fall outnumbered bullish wagers by 82,821 in the week to Sept. 13, a decline of almost 8 percent from a week earlier.
Bets the pound will weaken were cut as markets were “encouraged by the better tone of recent U.K. data releases,” Jane Foley, a senior currency strategist at Rabobank International wrote in a note to clients. “That said, the dovish tone expressed by the BoE last week may hinder this reversal.”
While an improvement in London house prices that was reported Monday supported the recovery signs, a report by Lloyds Banking Group showed that business confidence slumped to a four-year low, pointing to longer-term risks.