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British pound surpasses $ 1.41, helped by relief from Scotland and weak dollar

By on May 10, 2021 0

* Chart: World exchange rates in 2020 tmsnrt.rs/2egbfVh

* Chart: British pound trade-weighted since the Brexit vote tmsnrt.rs/2hwV9Hv (Updates prices, adds comments, CME data, lock easing and chart)

LONDON, May 10 (Reuters) – The pound climbed to $ 1.4158 on Monday, its strongest in more than two months, fueled by a combination of dollar weakness, better economic forecasts, easing measures in the foreclosure and market relief regarding the Scottish election outcome.

Pro-independence parties won a majority in the Scottish parliament on Saturday, which Scottish leader Nicola Sturgeon said gave him a mandate to push forward plans for a second independence referendum.

But the pound strengthened as market participants failed to interpret this as a short-term risk as Sturgeon’s party failed to win an outright majority. Sturgeon said his first task was to deal with the COVID-19 pandemic.

“The market has basically judged that she is not coming away with a very, very strong mandate for an impending referendum,” said Ned Rumpeltin, head of European currency strategy at TD Securities.

Any second referendum on Scottish independence requires the approval of the British government and Prime Minister Boris Johnson has ruled it out.

At 2:23 p.m. GMT, the pound was up 1.1% on the day to $ 1.4125, after breaking through the key $ 1.40 level for the first time since February during the Asian session, and is rose above $ 1.41 during the European morning session.

Against the euro, it was up 1% to 86.035 pence per euro, after hitting 85.97 earlier.

Analysts said the pound’s movement against the dollar was also due to dollar weakness, with the greenback falling to a two-month low after a disappointing US jobs report.

The pound’s gains could also be a delayed reaction to the Bank of England‘s uptick in its forecast for UK economic growth at its meeting last week, some analysts have said.

The BoE slowed the pace of its trillion-dollar bond buying program on Thursday, but stressed it was not reversing its stimulus.

“We take this move as a legacy as the market moves towards the Bank of England’s bullish set for the UK and now greater confidence in the weak dollar environment,” the strategists wrote. of ING FX in a note to clients.

Johnson is due to initiate the next phase of easing the lockout in England, with changes set to begin on May 17.

“The reopening of the dominant services sector in the UK with the removal of foreclosure restrictions should give sterling a boost,” said Stuart Cole, macroeconomic economist at Equiti Capital.

Sterling dollar currency futures volumes are up 57.4% so far in May compared to the same period in May 2020 and there were $ 10.9 billion in dollar futures sterling traded on Friday, which is above the year-to-date average of $ 7.8 billion, according to CME data.

Elsewhere, CFTC positioning data showed speculators reduced their net long position in the pound in the week to May 4.

Reporting by Elizabeth Howcroft Editing by Gareth Jones, Steve Orlofsky and Alison Williams

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