|18 February, 2020

Pound pushes past $1.30 after Sunak says UK budget due on March 11

Pound enjoyed its best week in two months

A pile of one pound coins is seen, in central London June 17, 2008.

A pile of one pound coins is seen, in central London June 17, 2008.

REUTERS/Toby Melville

LONDON- Sterling climbed past the $1.30 mark on Tuesday after British finance minister Rishi Sunak said he would deliver the budget as planned on March 11.

Sunak's predecessor Sajid Javid unexpectedly resigned in a government reshuffle last week, raising questions about whether the budget would be delivered on schedule.

In a tweet at 0951 GMT, Sunak said: "Cracking on with preparations for my first Budget on March 11. It will deliver on the promises we made to the British people - levelling up and unleashing the country’s potential."

The pound, earlier down against both the dollar and the euro on conflicting views put forth by Britain and the European Union on trade negotations, gradually reversed losses to trade positive on the day.

Viraj Patel, currency and global macro strategist at Arkera noted a delayed reaction in the currency to the news, adding that the pound hitting the key $1.30 level may have triggered a bout of short-covering by traders.

"The tweet may have been the catalyst for a few long bets that took us above $1.30," he said.

By 1148 GMT, the pound was 0.3% higher to both the dollar at $1.3038 GBP=D3 and the euro at 83.05 pence.

Last week, sterling enjoyed its best week in two months after Sunak was appointed finance minister, with markets betting he would be more willing to support an increase in government spending and investment than Javid.

Constrasting comments from Britain and the EU on trade hit the currency earlier this week.

Prime Minister Boris Johnson's Europe adviser, David Frost, said on Monday Britain would not be threatened into following EU rules to win a free-trade agreement with the bloc. 

Frost's comments came in contrast with those of EU Commission President Usula von der Leyen, who has called on Britain to guarantee fair competition based on ambitious environmental and labour standards. 

Data on Tuesday showed the number of people in work in Britain jumped again in the last three months of 2019, which underscored how the labour market defied a slowing of the broader economy ahead of December's election. 

"Once again cable is demonstrating its obsession with the $1.30 level," said Jane Foley, head of FX strategy at Rabobank in London, noting markets' expectations that less political risk will unleash a wave of pent up investment demand in Britain has been instrumental in supporting the pound.

"This morning, the zig-zag action in cable has continued with good UK labour data suggesting that the Bank is unlikely to see any urgency for a policy move."

Signs of weakness in Britain's labour market in the autumn prompted two Bank of England interest-rate setters to vote for a cut to borrowing costs.

But the BoE's other seven rate-setters have kept borrowing costs on hold amid signs that the economy has gained some momentum in early 2020 following Johnson's election victory on Dec. 12.

(Reporting by Ritvik Carvalho; Editing by Tommy Reggiori Wilkes and Alison Williams) ((Ritvik.Carvalho@thomsonreuters.com; +44 2075429406; Reuters Messaging: ritvik.carvalho.thomsonreuters@reuters.net))

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