Sterling on track for largest daily fall vs USD in two weeks

21 Nov 2022

The Pound declined against a strong Dollar on Monday as global risk sentiment was impacted by escalating Covid cases in China, leading to fresh restrictions in the country.

Sterling fell 0.6% to $1.1816 at the time of writing, on course for its largest daily decline against the greenback in nearly a fortnight as China grapples with rising coronavirus numbers. 

“Sterling has opened the week on the back foot, in line with broad risk dynamics... Broad risk negativity weighs amidst renewed Chinese lockdown fears,” said Jeremy Stretch, CIBC’s head of G10 FX strategy.

The Pound rose 0.2% against the Euro, as the single currency is hit hard by the Covid situation in China, trading at 86.62 pence after reaching its highest against the Euro since the beginning of the month. 

Sterling is forecast to weaken more this week, as public finances data is published on Tuesday and flash PMI figures a day later, Reuters news agency reports. 

“Weaker sentiment and worsening public finances suggest that the recent correction in real money sterling shorts is already fully valued,” Stretch added.

The Pound was shrouded in volatility last week following the tax hikes and spending cuts unveiled by Chancellor Jeremy Hunt in the battle to rein in inflation.

In addition, the Director General of the Confederation of British Industry, Tony Danker, said the UK should introduce a series of temporary work visas to bolster economic growth and also resolve the issue with the EU regarding trade rules in Northern Ireland.