LONDON: Sterling gained some ground against a broadly weaker euro on Thursday while falling back from a near-three-week high against the dollar in a market struggling for new direction after six months of political and economic jitters.
Some analysts said the pound, which hit 7-year highs after last month's election generated none of the predicted trouble in forming a government, had suffered from the lack of any hints in an annual speech by the Bank of England's governor on when interest rates might be lifted from their historic lows.
Traders said there had been minimal trading in a market made more volatile over the past two months by sharp and unexpected moves in traditionally more reliable Bund yields.
"I have honestly done one trade today and it was only because I had a stop-loss triggered on one of my positions," said a trader with one international bank in London.
"That said, sterling has moved around a bit. There were some people unwinding long bets on the euro and that has given the pound some support."
In a speech at Mansion House to the City of London on Wednesday, BoE Governor Mark Carney focused on plans to clamp down on market abuse but did not comment on monetary policy.
That was in contrast to last year, when he sparked a sharp rally in the pound by saying interest rates could rise sooner than markets then expected.
After a run of mixed economic data, investors are not now expecting the BoE to begin to hike rates until at least the middle of next year.
And with the US Federal Reserve on track for its first rate rise since 2006 in September, traders reckon the dollar is a more attractive currency than the pound.
Sterling had risen as high as $1.5554 on Wednesday, its strongest since May 22, after data showed British industrial output grew faster than expected in April, bolstering hopes that Britain's economy picked up speed in the second quarter.
But with no fresh impetus to buy the pound it pulled away from that high on Thursday, trading down 0.2 percent on the day at $1.5498.
"The US is still at the top, sterling is in between, and the euro is at the bottom," said Hamish Pepper, a currency strategist at Barclays.
"The general theme is one in which you see the US as your top performing economy and the one closest to normalizing policy, most able to create inflation, but then the UK is not miles behind.
And that's why we've still got a view of sterling outperformance versus the euro."
Comments
Comments are closed for this article.