UPDATE 1-Sterling rises above $1.38 but still set for second consecutive weekly loss

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

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Updates thoroughout)

LONDON, July 9 (Reuters) – Sterling edged higher versus a weakening dollar on Friday but was still on track for a second consecutive weekly decline as global sentiment has become less bullish amid a surge of Delta coronavirus variant cases.

Sterling edged 0.2% higher to $1.3817 by 1129 GMT as risk currencies tried to recover after being hurt by a broader shakeout in FX markets that saw riskier currencies like the pound fall and safe havens gain on Thursday.

“Global growth sentiment is becoming less bullish as fears grow about the spread of the current Delta COVID variant and this is weighing on higher Beta currencies such as the pound,” said Stuart Cole, head macro economist at Equiti Capital in London.

Sterling has been among the top performing G10 currencies this year following Britain’s quick vaccination rollout, which added hopes for a quick economic recovery.

But adding pressure on sterling, data showed Britain’s post-lockdown economic rebound slowed sharply in May with gross domestic product growing by 0.8% from April, much weaker than the median forecast of 1.5% in a Reuters poll of economists.

These “cracks in the so-far very positive recovery story in the UK may leave sterling a bit more vulnerable,” said Francesco Pesole, FX Strategist at ING.

Versus the euro, sterling rose 0.1% at 85.82 pence, after having its worst day in two months on Thursday as the European Central Bank set a new inflation target, which gave the euro a broad boost.

Capping sterling declines this week, transport secretary Grant Shapps said fully vaccinated UK residents returning from medium-risk amber list countries would from July 19 no longer have to quarantine when they arrive home.

The move was seen as an indication that the recent increase in COVID-19 cases was not set to derail re-opening plans, analysts said.

Investors had remained cautious as the government confirmed this week plans to end social and economic COVID-19 restrictions in England on July 19 but also warned that the number of coronavirus cases could climb as measures are relaxed.

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