Sterling takes UK data in its stride, slips vs dollar, up vs euro

LONDON: Sterling was on the front foot against the euro but weaker against the dollar on Monday as traders took their cue from broad market trends, absorbing UK manufacturing and mortgage data that contained no major surprises.

Data showed that British manufacturing grew in line with forecasts at a slightly slower pace in May than April, while mortgage approvals in April fell to their lowest level since last July, adding to signs the housing market may be cooling.

Sterling slipped against a broadly resurgent dollar, which continued to move higher thanks to a more positive technical outlook and improving US economy.

The pound rose against a euro under broad selling pressure ahead of widely expected policy easing by the European Central Bank this week.

"You can't talk about sterling in isolation. We've got two external factors driving it - the weakness of the euro and strength of the dollar," said Nick Parsons, global head of forex for National Australia Bank in London. "You have to take the mortgage data with a little bit of a pinch of salt.

It's too early to say if this is a real slowdown in the housing market and as long as euro/sterling is broadly under pressure it's not correct to talk about sterling weakness," Parsons said.

At 0910 GMT the pound was down 0.1 percent against the dollar at $1.730 and the euro was down 0.2 percent at 81.22 pence.

Sterling had run up to a 5-1/2 year peak against the dollar earlier in May.

Over the last year the pound has appreciated some 10 percent against a basket of currencies on the growing assumption that the improving economy and red-hot housing market would force the Bank of England to raise rates faster than its euro zone and US peers.

But a less febrile housing market has tempered more aggressive expectations on when the BoE will start raising interest rates and encouraged traders to cash in on that rally.

Last week, sterling chalked up its biggest weekly loss against the dollar in ten weeks, and its biggest decline against the euro in eleven.

The dollar inched up to a two-month high on Monday, while the euro fell below $1.36 towards last week's four-month low as traders bet on aggressive ECB action on Thursday to counter the threat of deflation in the euro zone.