Pound recovers after fall against US dollar on news of death of Queen Elizabeth

But one expert says the Queen's death has "no significant impact on the pound" as politically, she had little significance. PHOTO: REUTERS

NEW YORK/LONDON - The pound recovered after falling against the US dollar overnight in choppy trading after Queen Elizabeth II, Britain's longest-reigning monarch and the nation's figurehead for seven decades, died.

The pound was trading up 0.6 per cent at US$1.1578. It dropped as low as US$1.1488 following the news of the British monarch’s death.

The euro rose 0.16 per cent against the pound to 86.04 pence, after a jumbo 75 basis point rate hike from the European Central Bank on Thursday.

"There is no significant impact on the pound," said Mr Amo Sahota, director of foreign exchange consulting firm Klarity FX in San Francisco.

"The Queen was clearly an icon in British culture, but politically very little significance," he said. "There are going to be questions around the prime minister. It is a government that is in transition anyway. But it won't have any bearing on the economy."

Prince Charles, Britain's new king, described the death of his mother, Queen Elizabeth, as "a moment of the greatest sadness", in a statement issued by Buckingham Palace.

The pound had been trading lower earlier in the global session as hawkish remarks from Federal Reserve chair Jerome Powell offset British policies unveiled by new British Prime Minister Liz Truss aimed at reducing surging energy costs.

In remarks at a Cato Institute conference, Mr Powell said the Fed needs to keep going until it gets the job done and that it is "strongly committed" to bringing inflation down. His comments pushed the US dollar higher across the board overnight, including against the pound.

But the US currency took a breather from its surging rally on Friday, with the US dollar index down 0.25 per cent to 109.25, just off a 20-year top of 110.79.

The Singapore dollar rose slightly against the US dollar. It was trading at 1.3998 per US dollar at 10.57am (Singapore time) on Friday, up 0.4 per cent from Thursday’s close, according to Bloomberg data.

Against the pound, the Singdollar weakened 0.3 per cent to 1.6207 from the previous day’s close.

Ms Truss told Parliament on Thursday that the average household energy bills would be held at around £2,500 (S$4,050) a year for two years, staving off the expected 80 per cent leap that was due in October and that threatened the finances of millions of households and businesses.

"The highlight of the Truss announcement is the energy intervention, expected to curb peak inflation by up to 5 percentage points," said Mr Kenneth Broux, currency strategist at Societe Generale.

"For the market, this is the big takeaway," Mr Broux said. "The reason cable (sterling/dollar) has come down so much is not just a strong dollar but also the surge in inflation expectations."

Mr Broux said the UK inflation curve was reacting positively to the headlines and if inflation expectations come down "that saves the pound from new lows", though he said it was too early to recommend buying sterling on the dips. REUTERS

• With additional information from The Straits Times

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