Sterling hits four-week high
Sterling hit a four-week high against the dollar on Monday as expectations UK growth numbers would point to sustained recovery supported the currency. Analysts said markets were, however, unwilling to bet aggressively on more sterling strength with the Bank of England likely to keep monetary policy loose despite improving data.
Copyright Reuters, 2013
The pound was up 0.6 percent at $1.5355, having hit an intra-day high of $1.5385 which was its highest since July 26. Traders said the pound rose as large stops were triggered once the pair crossed the July 3 high of $1.5305. Data on Thursday is forecast to show the British economy grew 0.6 percent in the second quarter from the previous quarter and 1.4 percent on the year. This could lift sterling especially against the euro as the euro zone struggles with recession.
The euro fell 0.2 to 85.86 pence, off a session low of 85.82 pence, which was its weakest since July 10. "Sentiment is strong towards sterling for now. The growth rate is expected to be double the 0.3 percent we saw in the first quarter. That is being priced in right now and supporting sterling," said Kathleen Brooks, research director at FOREX.com.
Above-forecast June retail sales, improving labour market conditions and Bank of England minutes unexpectedly showing all nine rate-setters opposed to more stimulus, have helped the pound in the past few sessions. Some analysts said Japan urging Britain on Sunday to maintain its leading role in the European Union may have given marginal support to the pound.
But market participants remained cautious before a BoE inflation report on August 7 and with the bank expected to pledge next month to keep interest rates low until the economy revives. Nawaz Ali, UK market analyst at Western Union, said a strong UK growth number could push sterling past the $1.54 mark briefly but added that he still expects "the pound in general to remain a 'sell' on concerns BoE Governor Mark Carney will likely uncover a new and unfamiliar monetary policy framework." "With that in mind it is very difficult to be bullish on sterling right now." Latest Commodity Futures Trading Commission data showed currency speculators remained net short on the pound, which means they expect a fall in its value.