Pound hovers near one-year high as dollar sags
By Harry Robertson
LONDON, Aug 21 (Reuters) -The pound steadied on Wednesday near the one-year high it touched against the dollar the previous day, with the U.S. currency under pressure from rising expectations of Federal Reserve interest rate cuts.
Sterling GBP=D3 was little changed on Wednesday at $1.3025, having touched its highest versus the dollar since July 2023 on Tuesday at $1.3054.
The pound was also steady against the euro EURGBP=D3, with one euro trading for 85.37 pence.
A fall in the dollar has been driving currency markets in recent days, as investors increasingly bet that the Fed will cut interest rates relatively sharply this year.
U.S. bond yields slid on Tuesday as markets positioned for rate cuts, making Treasuries look less attractive and causing the dollar index to sag to its lowest level this year.
"The fact that (sterling) has moved against the U.S. dollar this week is a function largely of the dollar weakness," said Jane Foley, head of FX strategy at Rabobank.
Yet Foley said the pound remains the best performing G10 currency this year - up about 2.3% against the dollar - and has benefited from the stability of a new government as well as better-than-expected economic growth.
Data last week showed Britain's economy recorded a second quarter of strong growth as it recovered from last year's shallow recession.
Investors on Wednesday were waiting for revisions to U.S. labour market data that could cause swings in global markets.
The Bureau of Labor Statistics will release revised figures for non-farm payroll numbers from April 2023 to March 2024 later on Wednesday, using tax data.
A weak non-farm payrolls report on Aug. 2 helped cause a sell-off in global stocks and a rally in bonds as investors worried about the U.s. economy, so a downward revision may reignite those concerns.
Fed Chair Jerome Powell is due to speak on Friday at the closely watched Jackson Hole conference in Wyoming, in another potentially market-moving event.
The pound showed little reaction to data on Wednesday which showed Britain's government again borrowed more than expected last month, highlighting the difficult fiscal backdrop for new finance minister Rachel Reeves.
British public sector net borrowing was 3.101 billion pounds ($4.04 billion) last month, the biggest July total since 2021.
Graphic: World FX rates in 2023 http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
Editing by Jan Harvey
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