On Monday, December 05, 2022, the British pound slipped as the impetus given by China's new COVID rules waned.

Initial investor enthusiasm over signs of a possible easing of COVID restrictions in China has faded. However, the pound slid on Monday and remained in sight of its highest levels over five months against the dollar. Late morning in London, much of the recovery in risk that brought sterling to a session high of $1.2345 fizzled out, leaving the pound down 0.3% to $1.2259. It fell by 0.4% against the euro to 86.13 pence.

The pound rose 5.2% against the dollar in November, its strongest one-month performance since 2020, but it could struggle to make much more progress, given an increasingly bleak economic picture in Britain and a delicate political landscape.

The dollar tiptoed into the day after China prepared to unveil a new set of measures to ease restrictions on activity, which investors took as a sign of a potential change in the government's tough “zero COVID” policy.

Much of the recent dollar weakness has also been driven by expectations from the US Federal Reserve, which expects rates to rise by just 50 basis points this month, after raising rates by 75 basis points at each of its last four meetings.