Respite for sterling as traders shun safe-haven dollar

Sterling eked out gains on Friday as investors grew more confident that the United States government and central bank economic stimulus could alleviate some of the impact of the coronavirus crisis.
The US dollar had previously strengthened on the back of its perceived safe-haven status while sterling - considered a riskier currency more closely associated with equity market performance - moved in the opposite direction.
Waters have calmed since the US government promised $2 trillion in fiscal stimulus and the Federal Reserve injected more dollars into the financial market by buying US government bonds and swapping dollars for foreign currencies with other major central banks.
"We are now seeing the predictable reversal of G10 FX performance on the back of the broad depreciation of the dollar in response to the liquidity measures by the Federal Reserve and the government measures on top," said Derek Halpenny, head of research at MUFG.
"Assuming these more favourable financial market conditions can now last for a period ... sterling could be rewarded further by the economic policies of the government to target more specifically the protection of employment."
The British government on Thursday said it will pay grants to self-employed people who have lost their livelihoods because of the coronavirus lockdown, further extending an unprecedented package of measures to bolster the economy.
Finance minister Rishi Sunak had previously announced that the state would pay part of employee wages to dissuade companies from implementing layoffs. Sterling was up 1% at $1.2345, a near-two-week high. Jane Foley, Rabobank's senior currency strategist, said she doesn't see the pound rising back towards $1.30 - where is was before COVID-19 pandemic - anytime soon.
Sterling was also rising by 1.2% against the euro to 89.43 pence, a two-week high.
The pound briefly turned negative earlier in the day after British Prime Minister Boris Johnson said he had tested positive for coronavirus. Halpenny said that sterling will continue to be affected by how fast COVID-19 spreads in the UK, where the number of coronavirus cases and deaths on Thursday registered their biggest daily increase since the epidemic reached Britain.