Sterling falls hard against dollar as UK prepares to extend lockdown
The pound fell sharply against the dollar this afternoon as the UK looked set to extend its lockdown for a further three weeks despite signs that the peak of the coronavirus pandemic was nearing.
The prospect of a further extension, which will keep the country under restrictive measures until early May at least, saw sterling fall 0.8 per cent against the dollar to $1.2423.
Against the euro it fared better, weakening 0.13 per cent to 0.8719p.
Analysts said the move was more a consequence of a strengthening dollar rather than the pound’s weakness, as the greenback gained for the second consecutive day despite further enormous job losses in the US.
CMC Markets Michael Hewson said that he did not expect to see sterling weaker much over the next few sessions.
“If it does it’ll only be as a result of a big rise in the value of the dollar”, he added.
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The fall came after a spokesman for Prime Minister Boris Johnson ruled out the UK agreeing to an extension to Brexit transition period, which is set to end in December.
The Downing Street response followed comments from the head of the International Monetary Fund Kristalina Georgieva, who told the BBC earlier today it was in everyone’s interest to extend the deadline to reduce uncertainty.
This afternoon Bank of England (BoE) policymaker Silvana Tenreyro said that the UK economy was likely to suffer an “extremely large” hit due to the ongoing lockdown.
In a speech, Tenreyro said the central bank was poised to act again if necessary but warned that monetary policy could only be part of the response.
Last month the BoE cut interest rates to record lows of 0.1 per cent and implemented a £200 bn quantitative easing program to support the beleaguered economy.
“The aim of our policy actions has been to ensure that the economic effects prove temporary, by minimizing business failures and job losses that could cause a lasting reduction in the supply capacity of the economy,” Tenreyro said.