Sterling rose to a six-week high versus a weaker dollar on Friday, buoyed by reported demand from a UK clearer and gaining in tandem with the euro and equities on hopes EU leaders may come closer to resolving the eurozone debt crisis. The pound rose one percent on the day to $1.5953, its highest since September 9, after sterling demand at the 1100 GMT fix pushed it through resistance around $1.5850-55, the daily high hit three times since last Friday.
Traders said the move above $1.5850 triggered a string of stop-loss orders, helping the pound to extend its gains and taking it beyond its 55-day moving average at $1.5936. Ahead of $1.60, sterling faces minor resistance at the September 9 high of $1.5991.
"Sterling has been so under the weather for so long and it may be seeing a bit of a natural correction now," said Lee McDarby, head of dealing for corporate and institutional treasury at Investec, though he said he expected it to run into offers around the $1.60 level. The pound gained along with the euro and global equity markets on optimism European leaders over the next few days will come closer to resolving the eurozone's debt crisis after Germany and France said a comprehensive deal was on its way.
The euro fell 0.25 percent to 87.03 pence, having hit an 11-day low of 86.70 pence. This lifted trade-weighted sterling to 79.9, its highest since October 3. Despite the climb, market players said the pound and other perceived riskier currencies would be vulnerable to shifts in sentiment in the run-up to the summits.
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