LONDON: Sterling inched lower against the dollar on Thursday and was a touch higher against a hard-pressed euro, showing resilience after a dip the previous day when the Bank of England warned on interest rates.
The growing consensus that the bank would move to raise interest rates from record lows in the first half of next year is behind a year-long march higher for the pound that has taken it to its highest since mid-2009 against the dollar.
But that rise has slowed in recent weeks, with increasing numbers of analysts saying speculation about a rate rise this year looks overdone given the lack of inflationary pressure across Europe.
Bank of England Governor Mark Carney said on Wednesday that while the economy had edged closer to a rise in rates, the recovery remained in its early stages.
He also outlined some of the bank's concerns over the strong pound.
But there was still enough optimism over sterling in the market for a number of banks to recommend buying the pound in response to any weakness on Thursday. "Although the pound may come under modest pressure from the US side today, we see yesterday's dip as a buying opportunity," said Chris Turner, a strategist with Dutch bank ING in London.
In early trade in London, sterling fell 0.1 percent to $1.6748, while gaining a similar amount against the euro to 81.70 pence.
A lot will depend on what happens to the dollar over the summer. If US data improves, the solid gains for the US currency predicted by many banks at the start of this year may finally materialise.
But given growing expectations the European Central Bank will take further steps to increase the supply of money in the euro zone economy next month, many are focused more on the pound's prospects against the euro.
The main event for markets on Thursday in that light should be a first quarter readout on euro zone growth due at 0900 GMT.
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