Sterling recovers as Prime Minister Johnson expected to return to office “shortly”

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LONDON (Reuters) – Sterling recovered early Monday from a slight decline against the dollar on expectations that Prime Minister Boris Johnson would be “soon” back to work after being hospitalized on Sunday evening with persistent symptoms of coronavirus .

FILE PHOTO: Banknotes of five British pounds are visible in this photo taken on November 14, 2017. REUTERS / Benoit Tessier / Illustration

The rebound came after Housing Minister Robert Jenrick said that Johnson was “in good health” and that he should be back at 10 Downing Street shortly.

Britain’s currency had hovered near a week’s low overnight after the British leader was hospitalized.

“The markets were quick to draw the worst possible conclusion and to assume that the Prime Minister’s illness would cause some dysfunction in the British government, which was not the case given that there were measures in place. room to deal with such a scenario, “said Viraj Patel, Global FX and macro strategist at Arkera, noting the appointment of Foreign Minister Dominic Raab as Johnson’s designated survivor.

“What we are seeing now is the pound sterling tracing this unusual downward trend as details emerge that we are far from the worst-case scenario of the troubled British government. “

In 0923 GMT, the British pound traded 0.3% to $ 1.2294. Against the euro, it gained 0.4% to trade at 87.82 pence. EURGBP = D3

The pound sterling has been falling against the common currency and the dollar since the start of the year, by around 4% and 7% respectively.

Pound has gained ground against the dollar in the past three weeks, as demand for US dollars has eased globally after central banks adopted massive stimulus packages to counter the impact economic impact of the coronavirus pandemic.

But analysts said the fundamental outlook for the currency remains weak as accelerating government spending threatens to worsen the UK’s current account deficit. This, along with weak economic data due to the pandemic and the backdrop for ongoing Brexit trade negotiations, are among the reasons why analysts say the currency looks vulnerable.

Speculators reduced their net long positions on the pound in the week before Tuesday March 31, according to data from the CFTC on Friday.

The UK construction industry recorded its largest downturn since the financial crisis over a decade ago last month, despite much less pressure than other industries to close due to the coronavirus pandemic .

A group representing the British auto industry has cut its sales forecast for this year by 23% to 1.73 million vehicles due to the impact of the coronavirus crisis.

(Graphic: construction activity in the UK IMAGE link: here)

Reports by Thyagaraju Adinarayan and Ritvik Carvalho; Editing by Gareth Jones

Our standards:Principles of the Thomson Reuters Trust.

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