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UPDATE 1-Sterling above $1.33 first time in 2020, hits 8-month high as dollar falls

Fri, 28th Aug 2020 14:02

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Updates prices, adds new comment)

By Olga Cotaga

LONDON, Aug 28 (Reuters) - Sterling rose above $1.33 for the
first time in 2020 and touched an eight-month high versus the
U.S. dollar purely on the greenback's weakness in the aftermath
of Federal Reserve Chairman Jerome Powell's speech at Jackson
Hole.

In his address, Powell steered expectations of lower
interest rates for longer as the central bank gets ready to
accept an inflation above target after so many years of it
undershooting 2%.

Against the euro, the pound remained relatively steady, with
most traders staying on the sidelines and not taking a clear
directional view on the British currency in thin August trading.

"It's this intermediate period when everyone is waiting to
see how things develop," said Esther Maria Reichelt, a forex
analyst at Commerzbank.

Renewed weakness in the British pound is not out of the
woods, analysts say, as a mix of Brexit uncertainty, coronavirus
fears and dismal economic data could well mean a return to a
continuous decline in sterling.

British business confidence has ticked up but remains far
below usual levels as the economy struggles to cope with social
distancing and employers are preparing to cut jobs, a survey
showed on Friday.

"At the moment we're concentrating a bit more on the Fed and
the dollar, but it will come that there's interest in sterling
again," said Andreas Koenig, head of global FX at Amundi, adding
that its fate will be determined by whether Britain manages to
successfully agree on a future trade deal with the EU.

Prime Minister Boris Johnson will launch a public campaign
next week to get Britain back to the workplace, as ministers
warn working from home will make people more vulnerable to being
sacked, The Telegraph newspaper reported.

Britain is trying to find a way to revive its serviced-based
economy even if it means doing so while COVID-19 - the
respiratory disease caused by the virus - remains a threat.

It said on Friday it will back three nationwide COVID-19
studies with 8.4 million pounds ($11 million) for research into
understanding human immune responses to the pandemic.

The pound was last trading hands at $1.3289, up
0.7% on the day, having rallied earlier to as high as $1.3320,
its highest since mid-December.

Versus the euro, it stood still at 89.50 pence,
flat on the day, but still close to the 2-1/2-month high of
89.30 pence it rose to on Thursday.

Traders were watching for the Bank of England Governor
Andrew Bailey's speech at Jackson Hole later in the day.

Commerzbank's Reichelt said Bailey might hint on whether the
BoE might consider negative interest rates in the future or not,
but otherwise the speech may be more of a non-event, she said.

(Reporting by Olga Cotaga, Editing by William Maclean and Mark
Heinrich)

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