The pound nudged higher this morning with the British government expected to announce it will proceed with plans to fully reopen the economy later this month despite a surge in COVID-19 cases.
After falling to its lowest level since mid-April at $1.3733 last week, the pound was 0.1% higher against the dollar at $1.3852 by 0827 GMT. Versus the euro, it rose 0.1% to 85.70 pence.
British Prime Minister Boris Johnson will set out plans for the final step of easing COVID-19 lockdown in England on Monday, including guidance on social distancing, face coverings and working from home.
Data suggests that cases will continue to rise as restrictions are eased, the government said, but the link to hospitalisations and deaths has been weakened by the vaccination programme.
The final step of lockdown easing was delayed by four weeks last month to enable more people to be vaccinated as the now-dominant Delta variant of the coronavirus drives a rise in COVID-19 cases.
There will be much focus this week on what the UK government says about fully opening the economy on July 19th – although as the BoE admits, this final stage of the re-opening will have little impact on activity.
Last week, sterling took a hit after Bank of England Governor Andrew Bailey warned against an over-reaction to rising inflation in Britain.
In his annual Mansion House speech, he said it was important to ensure that the recovery was not undermined by a premature tightening in monetary conditions, as a rise in inflation was likely to be temporary.
Sterling, however, found some support on the European Union decision last week to extend by three months an exemption on customs checks on chilled meat shipments to Northern Ireland.