LONDON – Sterling resumed its role as a risk-driven currency on Friday and was on track for its biggest daily fall since June against the dollar, as global market sentiment turned sour after the latest standoff between Washington and Beijing.
Meanwhile the exchange rate between the naira and the US dollar as of Friday, August 7th 2020 stands at ₦486/US$1 in the parallel market. The exchange rate closed at ₦486/US$1 on Thursday 6th August 2020.
World stocks tumbled and the U.S. dollar rose after U.S. President Donald Trump banned U.S. transactions with two popular Chinese apps: Tencent’s messenger app WeChat and ByteDance’s video-sharing app TikTok.
Ties between the world’s two largest economies have been strained for months, with the United States blaming China for the novel coronavirus outbreak and moves to curb freedoms in Hong Kong.
U.S. jobs data showed that employment growth slowed considerably in July, but the dollar still strengthened, acting as a safe haven currency.
Cable fell as low as $1.3010 and was not far off that at $1.3053 at 1530 GMT, down 0.7% since New York’s close, having earlier been on track for its biggest daily fall since June.
Having rallied since the end of June, it was on track to end the week down 0.3%, compared with its 2.3% rise last week and 1.8% rise the week before.
Versus the euro sterling was little changed at 90.36 pence per euro.
The pound rose to a five-month high on Thursday after the Bank of England struck a less pessimistic tone about the coronavirus-battered British economy.
Traders also took confidence from the absence of signals that the BoE might introduce negative rates. The possibility of negative rates has been cited by analysts as a reason for recent sterling weakness.
According to a Reuters poll found that sterling is expected to lose some of its gains this year due to fears around Brexit and COVID-19.
The range of 12-month forecasts was wide: $1.18 to $1.44.
“Over the coming weeks, we think the market will be more focussed on headlines surrounding the ongoing Brexit negotiations rather than monetary policy,” Morgan Stanley analysts wrote.
Britain’s transition period with the European Union is due to end on Dec. 31, after which it will leave the single market and customs union.
No post-Brexit trade deal has been struck, but Britain’s top minister overseeing Brexit talks, Michael Gove, said that there had been a change of tone from the EU in recent weeks, allowing progress to be made.
UK unemployment and second-quarter GDP data are due next week. Rishi Sunak, Britain’s finance minister, said on Friday that extending the country’s furlough scheme, which is due to expire at the end of October, would leave some workers trapped in the false hope that they could return to their jobs after the pandemic.