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Sterling flattens on infrastructure spending promise, Brexit caps gains

Monday,   29-Jun-2020   03:22 PM (IST)

Sterling flattened on Monday from a one-month low touched on Friday against a weaker dollar as Prime Minister Boris Johnson signalled he would double down on plans to increase public investment, but Brexit risks capped the gains. Speaking in a radio interview, Johnson said that a return to austerity would be a mistake as the country tries to recover from the coronavirus hit to the economy. Home Secretary (interior minister) Priti Patel said on Sunday that the government would roll out a plan on Tuesday to boost spending in infrastructure. The pound flattened versus a weakening dollar at $1.2340 at 0840 GMT after the greenback retreated from a one-week high hit on Friday against a basket of currencies, with investors fearing a fresh coronavirus wave in the United States. Versus the euro, sterling was down 0.3% at 91.20 pence, close to levels it hit on Friday, its lowest against the single currency since March 26. Little progress has been made in agreeing Britain’s future trading relationship with the EU, which it exited on Jan. 31. Johnson told his Polish counterpart Mateusz Morawiecki on Saturday that Britain would be ready to quit its transitional arrangements with the EU “on Australia terms” if no deal on their future relationship is reached. Australia has no comprehensive trade deal with the EU. Much of EU-Australia trade follows default World Trade Organisation rules though specific agreements are in place for certain goods. In a news-heavy weekend, Britain’s most senior civil servant stepped down on Sunday after reports of clashes with Johnson’s top political adviser, part of what is expected to be a wider shake-up of officials at the heart of power. Investors also have also been cautious over fears of a second wave of coronavirus infections as Johnson announced last week a significant easing of the lockdown in England, saying pubs, restaurants and bars can reopen from July 4.