Sterling rebounds from 6-week low vs dollar as selling pressure eases

LONDON: Sterling was little changed on Thursday after an early dip, with traders pausing during a week of heavy selling that has put the currency on track for its biggest weekly fall in over two months.

Figures this week showed Britain's red-hot housing market may be cooling, prompting some of the more aggressive bets on the timing of the first Bank of England rate hike to be scaled back.

That helped pull the pound back from a recent 5-1/2 year peak against the dollar and 18-month high against the euro. The selling continued early on Thursday but traders' appetite to push it lower quickly evaporated.

Still, barring a continued recovery through to the end of the week, the pound will post its biggest weekly fall against the dollar, euro and on a trade-weighted basis since mid-March.

"We had reached a sweet spot in terms of UK macroeconomic data and sentiment," said Neil Jones, head of hedge fund FX sales at Mizuho in London.

"But the market is still fundamentally and structurally long (of pounds), so I think this weakness is only temporary," he said.

Sterling fell as low as $1.6691 early on Thursday, but by 0850 GMT it had recovered to $1.6735, up slightly on the day. On Wednesday, the pound fell 0.6 percent, its biggest one-day fall against the dollar in almost four months.

The pound was unchanged against the euro at 81.32 pence per euro.

The trade-weighted value of sterling, a BoE measure of the currency's value against major global trading counterparts, was at a two-week low of 86.70. That index is down more than half a percent this week, on for its biggest weekly decline since mid-March.

Financial markets still widely expect the BoE to be the first major central bank to raise interest rates following emergency post-crisis rate cuts to virtually zero. But that may not happen this year, as some traders had started to speculate.

The consensus in a Reuters poll of economists on Wednesday showed the first rate hike is likely to be some time in the second quarter of next year, although at least one rate-setter will break ranks and vote for a move by August.