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Sterling little changed as Covid data, Jackson Hole in focus

Sterling

The pound was down 0.1% against a slightly stronger dollar at $1.3721

Sterling was little changed on Wednesday, dropping slightly against the dollar but lacking direction overall as investors weighed Covid-19 data and waited for the US Federal Reserve’s annual symposium on Friday to give momentum to the dollar.

Risk appetite was mixed, with riskier currencies such as the British pound supported by higher commodity prices at the start of the week, but gains were limited by worries over the Delta variant of coronavirus.

Investors eye Friday’s Jackson Hole conference, with some investors expecting Chair Jerome Powell to give hints about tapering the Fed’s bond-buying scheme.

The pound was down 0.1% against a slightly stronger dollar at $1.3721 at 1413 GMT. The pound reached a one-month low of $1.3602 on Friday last week as the dollar index strengthened.

Versus the euro, the pound was flat at 85.66 pence per euro. The pound has generally benefited from expectations that the Bank of England (BoE) will tighten policy before the European Central Bank (ECB).

GBP remains very much range-bound, with few immediate drivers seen on the horizon. GBP may take some lessons from Hungary, however, ING strategists wrote in a note to clients.

Hungary’s central bank said on Tuesday it would start gradually withdrawing its bond-buying programme.

Analysts are also keeping an eye on COVID-19 data. Britain has been reporting a steady increase in the numbers of people dying since mid-July when lockdown restrictions were lifted.

COVID news has the potential to have some sort of restrictive influence on consumer behaviours and I think all of these do feed into the Bank of England debate for next year, said Jane Foley, head of FX strategy at Rabobank.

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