Sterling rose against the dollar for the first time in three sessions, ending its biggest two-week drop in more than seven years on Monday after U.K. authorities announced measures to keep the economy afloat while the country makes plans towards exiting from the European Union.
Chancellor of the Exchequer George Osborne has already introduced a lower corporate tax rate and the Bank of England Governor Mark Carney is scheduled to announce other available tools on Tuesday. Some traders say that the U.K. currency is currently near oversold levels, following its plunge to the lowest level in more than three decades last week and is poised to reverse direction.
The pound climbed 0.2 percent to $1.3287 at 1:23 p.m. in Tokyo, following a two-week, 7.6 percent slide. It was the worst performer in June among 31 major currencies tracked by Bloomberg. Sterling’s 14-day relative-strength index was at 31.7.
According to Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland, “The latest measures announced to stimulate the U.K. economy -- lower corporate taxes and BOE macro-prudential easing -- should be viewed by the market as positive and may help the pound partly rebound in the near term. But ultimately, a lower pound will be required to help rebalance the U.K. economy.”
Aussie in Flux
The Australian currency initially fell as much as 0.8 percent to 74.41 U.S. cents after an election Saturday left neither of the major parties with enough seats to form a government in their own right, potentially increasing risks to the country’s top AAA credit rating. It recovered somewhat to end up almost unchanged at 74.89 cents. The country’s benchmark equity index, the S&P/ASX 200, was up 0.2 percent.
Australian bond prices declined on Monday even after the U.S. market rallied at the end of last week, pushing the yield on the benchmark 10-year note up by 4 basis points to 1.99 percent as of 2:12 p.m. in Sydney. That’s 55 basis points more than equivalent U.S. debt.