Sterling Bounces Back as Safe-Haven Rush Subsides
Sterling has experienced a resurgence, climbing off recent lows and following a broader market rebound. The currency’s recovery comes as the rush to safe-haven currencies and assets, prompted by the Middle East conflict, eased.
On Tuesday, the pound rose by 0.5% against the Japanese yen, hitting 182.5 yen, after experiencing a similar decline the previous day. The yen, often considered a safe-haven currency during market turbulence, had benefited from the recent geopolitical tensions. Sterling also strengthened against the dollar, rising by 0.2% to $1.2265.
This recovery in the pound against the dollar marks its fifth consecutive day of gains after a challenging September, during which it experienced its worst month in a year. Last week, the currency hit a six-month low of $1.20385 as investors reevaluated the possibility of multiple interest rate hikes from the Bank of England.
Jane Foley, head of FX strategy at Rabobank, attributed the recent rise in the pound to a dollar story. She explained, “The dollar has been taking a bit of a breather, as despite the blowout payrolls number on Friday, there was enough in the report to keep on track the view that inflation pressures in the U.S. are moderating.”
The rebound in the pound can also be attributed to the market’s recovery from the initial risk-off sentiment caused by the events in Israel over the weekend. As the market sentiment improved, investors began to refocus on the U.S. payrolls number from Friday, which indicated that U.S. employment had increased the most in eight months. However, the annual increase in wages was the smallest gain since June 2021.
Against the euro, the pound maintained its stability, trading at 86.39 pence. In late September, the British currency had weakened significantly, reaching as low as 87.06 pence per euro, the weakest level recorded since May.
The recent recovery in sterling provides some relief to investors who were concerned about the currency’s downward trajectory. Nonetheless, uncertainties surrounding Brexit negotiations and the Bank of England’s monetary policy decisions continue to impact the pound’s performance in the long term.
This article was edited by Gareth Jones and written by Alun John.
More detail via Daily Mail Online here… ( Image via Daily Mail Online )