LONDON: Sterling touched an intra-week low on Thursday but held above $1.31 as less dovish than expected minutes from the US Federal Reserve's latest policy meeting prompted bears to buy into the heavily shorted greenback. The pound traded at $1.3139, up 0.2% on the day, at 1445 GMT, recovering from a four-day low of $1.3062 hit in early trade but still far from Tuesday's eight-month high of $1.3276. Against the euro, sterling was at 90.12 pence, up 0.3%.
The Fed minutes were vague, saying a number of committee members thought a revised statement on policy strategy would be helpful at some point, without providing details or timing. They struck a cautious tone about the US recovery. That was enough to push risk assets - a category recently including sterling, given that the currency weakens when deteriorating market sentiment strengthens demand for the safe-haven dollar - into a likely short-lived correction.
"Risk assets around the world are suffering a corrective 24 hours," said ING analysts.
"The catalyst has been a set of FOMC (Federal Open Market Committee) minutes that has failed to feed the rally by seemingly neither offering enough clarity on strategy changes nor fresh stimulus". While the Fed's words prompted a reaction, the pound shrugged off the European Central Bank's minutes.
The account of the ECB's July meeting suggested on Thursday that some policymakers are not keen for another increase in the bank's 1.35 trillion euro ($1.6 trillion) pandemic emergency purchase programme (PEPP).
The pound has risen more than 7% versus the dollar in the past three months, but analysts have said this has more to do with the greenback than optimism over cable, as the coronavirus pandemic and Brexit woes mostly justify sterling depreciation.
Six-month risk reversals - the difference between put and call options - suggest money managers prefer selling the pound over buying it in the period which incorporates Britain's full exit from the European Union in December.
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