Sterling rebounds as markets worrying about the spread of coronavirus found some stability. The main driver of the pound was the return of the risk appetite following Monday’s selloff.
Investors pared back their rush into dollars that had sent the British currency lower.
Traders of the pound will also focus on EU and UK relations ahead of both sides launching into trade negotiations. European Union and Britain begin their negotiations to agree a trade deal for the end of a Brexit transition period in December 2020.
European and U.S. stocks had suffered their biggest loses since mid-2016 amid fears the coronavirus was morphing into a pandemic.
Countries around the world are stepping up efforts to prevent a pandemic, as infections tick past 80,000 people, 10 times more cases than SARS. The virus has continued to spread in Italy and Iran. Health ministries in the most affected countries urged people to stay at home.
That sent investors clambering for the safety of the dollar, the world’s most liquid currency. Sterling fell to as low as $1.2887.
The pound has been supported this month thanks to signs of a rebound in the UK economy. Expectations a new finance minister will raise public spending at next month’s budget weighed too.
START TRADINGForex – Sterling rebounds as risk appetite returns
The U.S. dollar weakened on Tuesday as expectations grew that the Federal Reserve would cut interest rates this year to relieve pressure on the economy caused by China’s coronavirus outbreak. For the year as a whole, traders expect the central bank to cut rates to between 1% and 1.25% from the current 1.5% to 1.75% range.
Against a basket of currencies, the dollar was a touch weaker at 99.321. However, without much good news on the virus, few expect the dollar to give back too much of its recent gains.
The yen traded only modestly stronger at 110.82 per dollar.
The Australian and New Zealand dollars were each about 0.2% stronger against the greenback.
Versus the euro, the dollar was up, although still above $1.08, a key level it broke last week. Euro/dollar was last down 0.1% at $1.0839.
In commodity markets, oil falls for third day as virus concern outweigh supply cuts. Oil fell towards $56 a barrel on Tuesday, declining for a third session.
Brent crude slipped 26 cents to $56.04 a barrel by 1105 GMT, giving up earlier gains. U.S. West Texas Intermediate crude was down 25 cents at $51.18.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money