The Sterling Steadies

The pound was little changed against the dollar on Thursday and a touch lower against the euro, but traders remained optimistic about its longer-term prospects.

Sterling had its strongest quarter against the euro since 2015 in the first three months of the year, gaining around 4.8 percent. UK manufacturing activity grew sharply in March as business optimism hit a seven-year high and vaccine rollouts buoyed the industry, according to data released today.

This morning, the pound was flat against the dollar at 1.3782. Versus the euro, it was down around 0.1% at 85.17 pence per euro.

Public opinion in Britain about the government’s handling of the pandemic has turned more positive and companies are gaining optimism, according to a survey published on Thursday.

The British Chambers of Commerce said 55 percent of member firms expected higher turnover in the next 12 months. However, immediate business conditions were well below pre-pandemic levels as the country began 2021 under lockdown.

“While the GBP may continue to struggle vs. the USD in the current environment, we expect that it will remain well supported vs. low yielding G10 currencies such as the CHF, JPY and the EUR,” Rabobank senior FX strategist Jane Foley wrote.

Foley added that there are “choppy conditions” ahead for the pound, as the UK economy still has far to go before returning to pre-Covid levels.