LONDON: Sterling slipped against the dollar on Tuesday, slipping away from a two-and-a-half month high, in the absence of any new evidence of further improvement in the UK economy.
The US Federal Reserve begins a two-day meeting on Tuesday, also making investors cautious.
The pound was down 0.1 percent at $1.5490, off a Monday's peak of $1.5547 when it stopped shy of its 100-day moving average of $1.5567 and its $1.5561 21-week average.
The currency has risen since data late last week showed the British economy avoided recession and grew by more than expected in the first quarter, causing market participants to scale back bets on more immediate monetary easing by the Bank of England.
For it to extend its gains, analysts said data will need to show the economic recovery has extended beyond March.
Highlighting the uncertain outlook, a survey on Tuesday showed British consumer confidence dropped unexpectedly in March.
Investors will be focused on purchasing managers' surveys on manufacturing, construction and services sector activity for April which are due on Wednesday, Thursday and Friday.
"As long as we don't see the manufacturing and services ... move lower this should be generally supportive for sterling," said Simon Smith, chief economist at FXPro.
But he expected any rise in the pound to be limited to around $1.5570-$1.5600. Some investors remained cautious about buying the pound given the risk that Britain's recovery could falter and that incoming BoE governor Mark Carney may advocate aggressive monetary easing when he takes over in July.
Developments in the United States will also be key to determining whether the pound can rise further, The dollar has come under selling pressure recently on evidence that the US recovery may be losing momentum.
"If we do see some weaker US data that could be an impetus to push sterling higher against the dollar. That would be contingent on not seeing a big deterioration in UK data," FXPro's Smith said.
The euro was down 0.1 percent against the pound at 84.38 pence and was vulnerable due to expectations that the European Central Bank may cut interest rates later this week.
Comments
Comments are closed for this article.