LONDON: The British pound edged up on Thursday, but remained close to this week’s one-month lows against the dollar, as a sense of stability returned to markets after an intensely volatile start to the week.
Sterling was last up 0.1% on the day at $1.27025, but still headed for a fourth weekly decline, having fallen nearly 1% so far this week, marking its longest stretch of weekly losses in almost a year.
The euro, which hit its highest against the pound since late April on Thursday, was up 0.1% at 86.15 pence.
The Bank of England’s knife-edge decision to cut interest rates last week dented the pound. But since then, concern about a hard landing for the US economy, among other factors, has triggered a selloff in risk assets, sweeping sterling lower along with other global markets.
On Thursday, however, the dollar side of the currency pair was under more pressure.
Sterling heads for best 2-week run since Nov
Traders are currently pricing in a full percentage point in Federal Reserve rate cuts this year, compared with around 45 basis points for the BoE, which in theory gives the pound an advantage.
Sterling is only down around 0.2% this year, still the best performance from a major currency against the dollar, compared with a 1% drop in the euro - the runner-up - or the 6.4% drop in the Norwegian crown, the worst performer.
That said, with the BoE now in rate-cutting mode and risk appetite looking fragile, sterling could struggle to make further headway, Chris Beauchamp, a market strategist at IG, said.
“After being knocked back from its gains yesterday, the price has moved higher,” he said.
“However, while a higher low is still a possibility here, it will need more than one day of gains. Sterling has been unable to manage this over the past month, with intraday bounces failing to carry over into the new session. Until this changes, the sellers remain in control.”
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