The pound held near lows last seen in 2020 against a strong dollar, as risk assets like the British currency remained under pressure on concerns over the impact of the lockdowns in China on the global economy.
Sterling edged lower, after falling on Monday below $1.27 against the dollar for the first time since September 2020 as fears around China COVID-19 measures encouraged investors to buy the safe-haven dollar.
Shanghai, the financial hub of China has now been under strict lockdown for around a month, while Beijing ramped up plans for mass-testing of 20 million people and fuelled worries about a looming lockdown.
Adding pressure on sterling, money markets scaled back their rate hike bets by the Bank of England in May, with analysts pointing out that fears of a recession and a slowdown in the job market may encourage the central bank to pace its monetary tightening plans.
Traders will be watching if U.S. consumer confidence data, due later in the day, will have any impact on the Fed interest rates hikes expectations.
The pound has declined around 5.5% versus the dollar in the past three months as Britain's geographic proximity with the Ukraine War has left sterling, alongside other European currencies, more vulnerable.
The euro is down to 2020-year lows with cable also at levels not seen since September ‘20. Despite Macron’s successful election win the euro failed to hold steady as the growth outlook continued to paint a worrying picture.
Meantime, Britain's finance minister Rishi Sunak was under pressure as figures showed that government borrowing in the 2021/22 financial year was almost 20% higher than forecast by the country's budget office last month.
With a quiet week of economic data ahead we turn towards the month of May to give us further direction on currency movement.
