Sterling fell against the US dollar and the euro on Thursday after the greenback rallied on strong US housing numbers and some large real money accounts reallocated funds away from the pound to the single currency. Also weighing on sterling was a mixed UK industrial trends survey that highlighted the dilemma facing Bank of England policymakers.
Sterling was down 0.8 percent against the dollar at $1.5864, off a high of $1.6010 and a eight-week high of $1.6060 struck earlier this week. Stop-losses were triggered after the pound fell past $1.5910 and then $1.5900, traders said. The dollar rallied broadly after US existing home sales surged more-than-expected in December while jobless claims fell sharply, suggesting an US recovery was on track.
Against the euro, the pound fell, with the single currency trading up 0.45 percent at 84.55 pence, after advancing to as high as 84.80 pence. At the session highs, it broke past resistance at its 200-day moving average around 84.62 pence and the 55-day moving average around 84.72. Traders cited decent buying in the euro/sterling pair by an UK clearer on behalf of a real money account.
"It was partly a dollar move, but there was a sell-off in sterling also which drove it lower," said Michael Hewson, markets analyst at CMC said. "We had seen nine successive days of gains in cable and positions were looking overstretched. It is a healthy correction but I don't think it can fall past $1.58 in the short term," The pound has been well supported since higher-than-forecast UK inflation data on Tuesday caused investors to bring forward expectations for when the BoE will hike rates, with a 25 basis point rise fully priced in by around mid-year.
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