Sterling slipped away from four-month highs versus the dollar on Tuesday on sovereign sales but it remained underpinned by upbeat manufacturing and construction data which tempered concerns over a lack of growth in Britain's economy. Activity in Britain's construction sector accelerated in March, with orders rising at their fastest rate in 4-1/2 years, following Monday's similarly positive manufacturing data, easing worries over the health of the economy.
Sterling was little moved by the construction data and traders said an Asian sovereign account later helped to push it down, triggering stop-losses below $1.60 into the afternoon session. It was last down 0.3 percent for the day at $1.5975, but still within range of Monday's peak of $1.6063, its highest since mid-November. The euro was up 0.3 percent against the pound at 83.35 pence, holding above last month's low of 82.83. Traders reported corporate euro demand placed under 83.00, while offers were highlighted around 83.45 and 83.65.
"Sterling looks like an okay bet for now as most of the bad news for the UK has been priced in," said Geoffrey Yu, currency strategist at UBS. "But I don't think investors are actively (favouring) sterling and in the next few months we think it is likely to head lower."
Market players said sterling's recent bullish tone was also being driven by expectations for further monetary stimulus in the United States. Such stimuli have weighed on the dollar which hit a one-month low versus a currency basket on Tuesday. Traders reported light flows across the major currencies before the release of Federal Reserve policy minutes later on Tuesday which could provide clues on the likelihood of more easing in the United States. A strong recent run against the dollar helped the pound to stay close to a 13-month trade-weighted high of 82.0 hit on Monday.