The pound halted its biggest two-week drop in more than seven years, after U.K. authorities flagged measures to mitigate the impact on the economy of the vote to leave the European Union.
Sterling was little changed against the dollar. Chancellor of the Exchequer George Osborne floated a lower corporate tax rate in an interview with the Financial Times, before Bank of England Governor Mark Carney outlines the available macroprudential tools on Tuesday.
“The prompt response by officials is reducing the risk of a severe downturn and that’s positive for some sterling-denominated assets,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London. Still, risks remain, he said, because he doubts “investors will discount the Brexit risk to such a degree as to adopt a constructive view on sterling.”
The pound was little changed at $1.3264 at 12:21 p.m. in London, following a two-week, 7.6 percent slide. It was the worst performer in June among 31 major currencies tracked by Bloomberg.
Sterling was little changed at 83.90 pence per euro after tumbling more than 3 percent last week.
The yen weakened 0.1 percent to 102.62 per dollar. The Japanese currency, in demand as a haven, climbed 16 percent in the first half, its best since 1995. It’s also the top-performing major currency after Brazil’s real in 2016.
Carney is set to make his third appearance in 12 days on Tuesday to address the threats facing the financial system. He’ll outline the macroprudential tools available to support the economy, boost business lending and encourage investment — and may ease capital requirements for lenders.
While this and Osborne’s tax proposal may provide some support for sterling after post-Brexit sell-offs, a number of strategists, including Ned Rumpeltin at Toronto Dominion Bank, say the pound is still on a sell-on-rallies mode.
“The key for us to remember is that is is a slow-burn story — one that is going to play out over months and quarters,” said Rumpeltin, the European head of currency strategy at the bank. “I don’t think the market has fully adjusted to what the U.K.’s departure means for the economy, particularly as there are so many questions about what that process will look like.”