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Sterling headed for worst week in a month as economic outlook sours

[LONDON] The pound fell on Friday and was set for its worst week in a month, weighed down by a bleak economic outlook after the week's data showed few signs of an economic recovery.

Prime Minister Boris Johnson eased some lockdown measures on Friday but also announced that local authorities will have power to shut down smaller areas of the country.

He said that normal life would not return in full until November at the earliest, with nightclubs and soft play areas remaining closed and wedding receptions limited to 30 guests.

With British gross domestic product data for May rising less than expected, investors doubt the fiscal stimulus measures already announced will be enough to prop up the economy.

Fewer British workers lost their jobs in June, official data on Thursday showed, but economists said unemployment was still expected to jump.

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The pound is the worst-performing G10 currency this week, down 0.6 per cent against the dollar. At 1052 GMT, it was flat against the dollar at US$1.2550.

Against a stronger euro, it was down around 0.4 per cent at 91.015 pence per euro.

"Sterling does well on the big risk-on days, rallies back, and then as soon as it's not a day where there's significant risk appetite in the market it shows its true colours a little bit more," said Kit Juckes, head of FX strategy at Societe Generale.

"There is concern about the UK economy, there is concern that the MPC (monetary policy committee) might end up easing further in the market," he said.

Bank of England Governor Andrew Bailey said on Friday that the full extent of the long-term damage to the economy remained unclear.

MUFG strategist Derek Halpenny wrote that Britain faced a "possible extreme period of dire sentiment" as the government plans to phase out its expensive job retention programme and investors fear it will manage only a poor trade deal with the European Union.

"The BoE will be unable to sit on the sidelines and watch," he added.

REUTERS

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