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By 3 Min Read* Sterling falls 0.2 percent against the dollar and 0.1 percent against the euro* On track to have its worst week in a month* Dollar strength is a headwind* Investors are concerned about the economic impact of the increased number of COVID cases. (Reuters) – LONDON, July 16 (Reuters) – Sterling fell against the dollar on Friday, heading for its worst week in a month, as investors sought refuge in the greenback amid growing COVID-19 cases throughout the world. The pound sank 0.3 percent against the dollar to $1.3805, putting it on track for a similar weekly loss, which would be its worst since mid-June if sustained. On Friday, the dollar rose 0.1 percent against a basket of currencies. The pound slipped marginally versus the euro to 85.53 pence, pulling back from three-and-a-half-month highs earlier this week. In recent weeks, the greenback has benefited from strong U.S. data and a shift in interest rate expectations after the Federal Reserve signaled earlier-than-expected rises in 2023 in June. The pound struggled to gain ground against a higher dollar, owing to mounting market speculation that the Bank of England will end its bond-buying program early due to an unexpectedly significant spike in inflation. Investors have to weigh the likelihood of tighter BoE policy, which is favorable of the pound, against fears about the economic consequences from the rapid spread of the COVID-19 Delta variant and the end of fiscal assistance measures like the employment furlough scheme, which is set to expire in September. In a note, MUFG analysts stated, “COVID cases are growing, and the impact on the economy could prove more significant than predicted.” “As a result, the employment furlough scheme’s unwind could be more disruptive than anticipated.” Even with an early end to its bond-buying program, market participants indicated on Friday that sterling was unlikely to experience significant gains without interest rate hikes. “Only minimal sterling strength is justifiable as long as there is no mention of a quick normalisation of interest rates,” Commerzbank analysts stated in a note. (Tom Wilson contributed reporting, and Ana Nicolaci da Costa edited the piece.)/nRead More

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