* Chart: Trade-weighted pound sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Add quotes, rewritten throughout)
LONDON, Oct. 1 (Reuters) – The pound reduced heavy weekly losses on Friday thanks to an afternoon rebound as sentiment improved in global financial markets, lifting currencies at risk and encouraging investors to withdraw from the safe haven dollar.
The pound hit year-round lows earlier this week, weakened by Britain’s truck driver shortage and surging energy prices as a hawkish Federal Reserve sounds and worries Chinese growth boosted the greenback.
“It was kind of a perfect storm for the pound sterling,” said Kit Juckes, chief currency strategist at Societe Generale, adding that the movement was “partially reversed” on Friday.
As markets advanced their expectations for a Bank of England interest rate hike, the likely upcoming tightening of monetary policy failed to support the currency.
“It was another dark week for the pound, which has remained very sensitive to fluctuations in sentiment and still struggles to profit from the recent hawkish revaluation of Bank of England rate expectations,” said Francesco Pesole, strategist at ING.
At 2:30 p.m. GMT, the pound was up 0.5% to 85.50 pence against the euro and 0.63% against the dollar at $ 1.3562.
At this rate, the British pound was on track for a weekly loss of around 0.8% against the dollar, a palpable improvement from the 1.5% weekly decline it was heading towards in the early morning hours. .
The British pound was one of the strongest currencies in the G10 earlier this year, with investors betting the UK economy would re-emerge from the pandemic faster thanks to Britain’s rapid vaccination program.
But that narrative has since collapsed, with the pound erasing all of its solid gains in 2021 and heading for an annual loss.
Many UK gas stations were still dry on Friday after a chaotic week that saw panic buying, fights at the pump and drivers spilling fuel into water bottles after a severe shortage of truck drivers who have strained supply chains.
Worker shortages in the wake of Brexit and the COVID pandemic have wreaked havoc on some sectors of the economy, disrupting fuel and medicine deliveries and leaving up to 150,000 pigs saved on farms.
“The current oil crisis underscores the effects of Brexit, even as Prime Minister Johnson tries to make it all positive,” Commerzbank analyst Antje Praefcke said in a morning note.
“The scepter of stagflation has yet to raise its ugly head but remains a possibility,” she added, also noting strained relations with France over post-Brexit fishing rights issues.
Data released by the Office for National Statistics showed that while the economy grew more than expected during the April-June period, it was poised to slow down as bottlenecks after the foreclosure, including the shortage of truck drivers, jeopardize the recovery. (Report by Julien Ponthus, edited by Mark Heinrich and Angus MacSwan)