Sterling dips amid wider market jitters

LONDON (Reuters) – Risk-sensitive sterling slipped against the dollar and euro on Friday, shedding some recent gains amid wider market unease that boosted safe-haven currencies.

European equity markets also opened lower as investors turned cautious, in part fuelled by a Wall Street retail-trading frenzy that has rattled institutional investors in recent days.

Sterling fell nearly half a percent below $1.37 against a broadly stronger dollar, last at $1.3660. Against the euro it was down 0.4% at 88.65 pence per euro.

The pound has held up better against the dollar than most of its G10 peers this week, with analysts citing the UK’s comparative progress in rolling out COVID-19 vaccinations.

This may not last, analysts at MUFG said in a note, pointing to data showing a slowdown in British vaccinations.

“We assume there will be a pick-up in the pace to keep the government on track to start a cautious reversal of the lockdown by 8th March,” they said.

“That will help provide further support for the pound and the current outperformance this week could have further to run over the short term.”

Sterling had reached its highest level against the dollar since May 2018 on Wednesday, hitting $1.3759.

Currency traders will be watching to see if the Bank of England, takes further monetary policy action next week. It is due to announce a rates decision on Feb 4.

(Reporting by Iain Withers; editing by John Stonestreet)