The pound falls as the Covid ‘pingdemic’ recovers in July.
The STERLING dropped on Friday as a survey revealed that the UK’s economic recovery slowed dramatically in July, when a surge of COVID-19 cases prompted hundreds of thousands of workers to self-isolate under government restrictions.
The initial magnitude of the impact was shown by Friday’s purchasing managers’ index (PMI) data.
In July, the IHS Markit/CIPS flash composite PMI fell from 62.2 in June to 57.7.
A rating of more of 50 implies that the economy is growing, but this was the lowest level since March and a deeper drop than most experts had predicted in a Reuters survey.
The pound was 0.2 percent down against the dollar at $1.3738 at 11 a.m. GMT, and 0.2 percent lower against the euro at 85.63 pence per euro.
Nonetheless, in the wake of fears over the spread of the Delta strain of the coronavirus, the pound has showed remarkable resistance to a larger selloff in many currencies this week – it is now practically flat against the dollar.
On Thursday, the government announced that daily testing would be implemented to let key sector employees to continue working instead of being forced to self-isolate after being exposed to someone who had tested positive for COVID-19 — a system that has caused significant disruption.
After a surprising drop in May, official statistics released on Friday revealed that British retail sales resumed their post-lockdown recovery in June this year.
Retail sales increased by 0.5 percent in June compared to May, according to a Reuters survey of economists. Retail sales were expected to rise by 0.4 percent month over month in June.
MUFG analyst Derek Halpenny said he was still optimistic, but that short-term buying was constrained as investors wait to see if the correlation between rising COVID-19 instances and hospitalizations has been broken definitively thanks to Britain’s quick vaccine implementation.
“We remain GBP bullish over the medium-term, but that view involves assumptions like COVID risks fading and the NI (Northern Ireland) protocol problem being resolved,” he said, referring to the dispute between the UK and the EU over post-Brexit trading arrangements for Northern Ireland.
Because of Britain’s very quick distribution of vaccines, which has hastened the pace of reopening, the pound had been a standout performer in 2021.
It’s only up 0.6 percent against the dollar this year, at $1.37, and it’s down from three-year highs of almost $1.42. “Brinkwire News in Condensed Form.”