LONDON: Sterling steadied against the euro on Friday near a three-week low struck after the European Central Bank stopped short of easing policy further, adding to an increasingly muddy outlook for the pound after six strong months.
The euro's jump against the dollar helped pull sterling a touch higher against the US currency to the top end of a band it has been stuck in since mid-February.
However, the pound's inability to break out of that range has prompted some to speculate sterling's strong run since the middle of 2013 may be tailing off, with a robust improvement in British growth prospects now largely priced in.
Sterling gained 0.2 percent against the dollar to $1.6748 in early trade. Paul Robson, a strategist at RBS in London, said that he still expected the pound to head towards $1.70 at least until a more robust picture of US growth emerges later this year.
But he said the next few days may see a readjustment against the euro.
"We have not changed our view in essence - the high frequency data on the UK remains relatively robust. But the one currency sterling may struggle against over the next few days is the euro," he said. "We are seeing something of a last hurrah where investors try and squeeze the last bits of additional yield out of the euro zone periphery and that will support the euro for a while yet."
The euro made broad gains after the ECB on Thursday decided to stand pat on policy and held off from fresh monetary stimulus, which had been expected by many in the market.
Market attention on Friday will focus on US non-farm payrolls, forecast to improve after two weather-disrupted months to show employers added 149,000 jobs last month.
A strong dollar was one of banks' big bets at the start of this year, but a particularly harsh winter has at least put that on hold.
"The Fed is still nowhere near even beginning to signal when it might raise interest rates while the high frequency British data remains relatively robust," Robson said.
"We do not think the dollar heads higher until the second half of the year."
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