LONDON: Sterling held its ground against the dollar on Wednesday, consolidating gains after hitting its highest in more than four months the previous day and then running into stiff chart resistance.
But the pound dropped to a two-week low against the euro, with traders citing buying from Swiss and US names that pushed the single currency above chart resistance.
Analysts said concerns lingered about the fragility of the UK economy and were likely to hamper the UK currency. However, its fall versus the euro was expected to be limited as the single currency is hampered by concerns about euro zone debt problems.
UK final gross domestic product data at 0830 GMT is expected to confirm that the economy contracted by 0.2 percent during the fourth quarter. The data is unlikely to be a market mover unless it contains any key revisions.
Bank of England Governor Mervyn King said on Tuesday that Britain faces a long road back to pre-crisis economic growth rates as banks are still reducing their balance sheets.
Sterling was steady against the dollar at $1.5936, dipping from highs hit on Tuesday when it briefly surpassed the psychologically key $1.60 mark to touch $1.6002, its strongest since November 14.
The pound's gains had been prompted by a sell-off in the dollar as speculation grew of more monetary easing in the United States.
Stiff resistance was seen at its 200-week moving average around $1.6014. Analysts said a break through this barrier has in the past been followed by sharp moves.
"There is a degree of consolidation in sterling after the sell-off of the dollar," said Derek Halpenny, currency strategist at BTMU.
However, he argued the fundamental outlook was not too negative for the pound.
"There are some positives for sterling relative to the euro (due to problems in Europe) and even relative to cyclical currencies like the Australian and New Zealand dollar from a valuation perspective."
The euro was up 0.35 percent at 83.78 pence, having broken above resistance at the March 21 high of 83.72 to hit a two-week high of 83.94 pence.
It stopped just shy of its 100-day moving average at 83.99 pence, a break of which would be needed before it can target the mid-March high of 84.24 pence.
"While below the 84.00 pence level the focus remains for a move towards a retest of the January lows at 82.20, on a break below the 82.80 level. Above 84.00 retargets the 84.25 area," said Michael Hewson, analyst at CMC Markets.
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