LONDON: Sterling steadied on Thursday after surging to an almost six-year high a day earlier, cooled by marginally poorer than expected service sector data and the wait for monthly U.S. jobs figures later in the session.
As Sweden's Riksbank became the latest central bank to slash interest rates to almost zero, Britain stood out as one of only two major developed world economies clearly on track for a move to higher interest rates over the next year.
The result has been a more than 10 percent rise for the pound against the dollar and a trade-weighted basket of currencies in the past year, and many analysts and dealers say that move may have more to run.
"The bottom line here is that the Bank of England is one of the very few going in the opposite direction on monetary policy and in the current environment that makes sterling one of the only clear positive plays," said one London-based trader.
"We keep trying to come off the top of this against the dollar, but it does not really want to go. There are a lot of buyers for sterling out there."
The PMI numbers on the UK's dominant services sector showed the main headline index of sentiment dipping to 57.7 points from a forecast 58.3 and 58.6 points a month ago. That still left it far above the 50 mark that separates expansion from contraction.
Sterling dipped afterwards to be just over 0.1 percent lower on the day at 79.66 pence against the euro and $1.7138. It hit a near 6-year high of $1.7180 on Wednesday.
"The services numbers were a little bit lower and the whisper number in markets had also probably been a bit higher than the consensus forecast so we have come off a touch," said Paul Robson, a currency strategist with RBS in London.
"But the story is still chiefly one of higher yields and that is what the pound provides just now. If the higher frequency data continues to outperform there is no reason to expect sterling to stop here."
The premium 10-year British yields offer over their German counterparts tightened one basis point to 145.5 basis point, but was not far from a high of 147.6 hit on Wednesday - the most it has offered investors since 1997.
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