LONDON (Reuters) – The pound sterling resumed its role as a risk-managed currency on Friday and was on its way to its biggest daily decline against the dollar since June as sentiment in the world market turned sour after the recent Washington-Beijing standoff .
FILE PHOTO: Pound Coins can be seen in this photo illustration taken in Manchester, UK on September 6, 2017. REUTERS / Phil Noble / File Photo
World stocks fell and the US dollar rose after US President Donald Trump banned US transactions with two popular Chinese apps: Tencent’s messenger app WeChat and ByteDance’s video sharing app TikTok.
Relations between the two largest economies in the world have been tense for months. The United States blames China for the new outbreak of the corona virus and is trying to restrict freedoms in Hong Kong.
The US employment data showed that employment growth slowed significantly in July, but the dollar continued to appreciate and act as a safe haven currency.
The cable fell to $ 1.3010 and wasn't far off at $ 1.3053 at 1530 GMT. That represents a 0.7% decline since New York City closed, after previously heading for its biggest daily decline since June.
Having rebounded since late June, it was on track to end the week 0.3%, compared to a 2.3% increase last week and a 1.8% increase for the week before.
Against the euro, the pound sterling has barely changed at 90.36 pence per euro.
The pound rose to a five-month high on Thursday after the Bank of England hit a less pessimistic tone on the coronavirus-ridden British economy.
Traders also trusted the lack of signals that the BoE could introduce negative interest rates. The possibility of negative interest rates has been cited by analysts as the reason for the sterling's recent weakness.
A Reuters survey found sterling is likely to lose part of its earnings this year due to concerns about Brexit and COVID-19.
The range of 12-month forecasts was broad: $ 1.18 to $ 1.44.
"We believe that the market in the coming weeks will concentrate more on the headlines in connection with the ongoing Brexit negotiations than on monetary policy," write analysts at Morgan Stanley.
The UK's transition to the European Union ends on December 31st. After that, it will leave the internal market and the customs union.
No trade deal was signed after Brexit, but the UK's top minister overseeing the Brexit talks Michael Gove said there had been a change of tone from the EU in recent weeks to move forward.
UK second quarter unemployment and GDP data is due next week. UK Treasury Secretary Rishi Sunak said Friday that the extension of the country's vacation program, due to expire in late October, would leave some workers trapped in the false hope that they could return to work after the pandemic.
Reporting by Elizabeth Howcroft; Edited by Larry King and Hugh Lawson
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