LONDON: Sterling fell on Thursday, erasing the week’s gains against the dollar, as investors weighed up the outlook for an economic recovery in Britain.

After a short squeeze at the start of April, the pound has strengthened against the dollar in the last couple of weeks - a move that Kenneth Broux, FX strategist at Societe Generale, said was driven by US Treasury yields coming down from their recent highs and prompting the dollar to weaken.

“If US 10-year yields were to test and break 1.50%, that would be bullish for the pound, certainly against the dollar,” Broux said. “I think the macro economic data (in Britain) is brightening, we’ve seen that in the economic numbers this week ... we also have strong consumption.

“The only question really for the pound is how much is priced in, in terms of the economy. We know Q2 will be strong-ish but we don’t know how strong it is and what is priced in.” British manufacturers’ expectations of an economic rebound rose to their highest since 1973 this month as the country began to recover from the slump caused by the COVID-19 pandemic, the Confederation of British Industry said. But the pound fell during the European session, in a move which analysts said lacked a clear fundamental driver.

At 1533 GMT, the pound was at $1.3844 versus the dollar, down 0.6% on the day. Versus the euro, it was down around 0.5% at 86.85 pence per euro.

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