By Stefano Rebaudo April 7 (Reuters) - Sterling edged higher on Tuesday but remained near early-March levels against the euro and close to a more than four‑month low versus the dollar. Britain is
Sterling Edges Higher but Stays Near Early March Levels Against Euro
Market Overview and Currency Movements
By Stefano Rebaudo
April 7 (Reuters) - Sterling edged higher on Tuesday but remained near early-March levels against the euro and close to a more than four‑month low versus the dollar.
Factors Influencing Sterling's Performance
Britain is highly exposed to energy imports and investors remain nervous about the country's fragile public finances.
Impact of Global Events on Currencies
The greenback edged lower as traders kept a close watch on a U.S.-imposed deadline for Iran to reopen the Strait of Hormuz to shipping or risk attacks on its infrastructure.
Sterling and Euro Movements
Sterling was last up 0.30% at $1.3278. It hit $1.316 last week, its lowest since November 26.
The pound rose 0.1% to 87.14 pence against the euro on Tuesday. It was at 87.60 before the beginning of the war in Iran.
Expert Insights on the UK Economy
“The UK is not as lacking in self-sufficiency as the European Union,” said Matthew Ryan, head of market strategy at global financial services firm Ebury.
“The UK's energy dependency ratio of around 35% actually compares rather favourably with the EU average, while domestic generation of renewables perhaps offers a partial growth buffer,” he added.
Bond Yields and Central Bank Policy
Yields on British government bonds, which had surged through much of March amid inflation fears triggered by rising energy prices following the Iran conflict, eased in late March and early April.
Bank of England Governor Andrew Bailey said last week markets were still getting ahead of themselves by pricing in interest rate hikes by the central bank, which wants to avoid adding to the damage Britain’s economy faces.
“Although forex markets are currently reacting less to changes in interest rate expectations, this is nevertheless one of the reasons why we still anticipate higher euro-sterling levels in the coming months,” said Michael Pfister forex strategist at Commerzbank, after referring to Bailey’s remarks.
Business Sentiment and Inflation Expectations
Businesses in Britain's services sector reported the biggest month-on-month jump in costs in March since 2021, while a Bank of England survey showed last week that British companies expect to raise prices more quickly in the coming 12 months.
(Reporting by Stefano Rebaudo; Editing by Susan Fenton)
