Pound Sterling rises as dollar falls amid thin August trading

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LONDON (Reuters) – The pound rose on Friday as the dollar fell amid thin August trading, keeping most investors on the sidelines from making directional decisions on the British currency.

Sterling inched up 0.3% at $1.3111 and up 0.2% at 90.27 pence against the euro. It has risen nearly 7% in the last three months against the U.S. dollar, almost exclusively on the back of the greenback weakening.

The dollar gave back more of its power on Friday after U.S. retail sales in July increased less than expected.

The dollar was last down 0.4% versus the Japanese yen at 106.51, and fell 0.2% versus the euro.

“It’s summer markets, nothing is going to happen, it’s all about the bond market at the moment,” said Kenneth Broux, head of corporate research at Societe Generale.

Borrowing costs in Europe have tracked U.S. Treasuries this week, which have been driven to new highs by a deluge of debt issuance in the United States.

Next week, Britain releases inflation data on Wednesday and retail sales on Friday, with both expected to be lower. Marshall Gittler, head of investment research at BDSwiss Group, said weaker data could make “further loosening more likely” by the Bank of England.

Novel coronavirus cases are rising in some parts of the world, which has prompted the British government to impose quarantine on many tourists returning from holidays.

Late on Thursday, it announced that it would require arrivals from France, the Netherlands and Malta to quarantine from 0300 GMT on Saturday because infection rates there were too high, dealing a new blow to the travel industry.

Britain can ill afford another coronavirus-induced slump after posting a 20% drop in second-quarter GDP. In October it is due to end a furlough scheme that has allowed millions to retain their jobs.

Prime Minister Boris Johnson has ordered the reopening of the economy in England to resume, saying a rise in infections that prompted caution two weeks ago had now levelled off, and warned of harsher punishment for those who breach the remaining restrictions.