RTRS:Sterling steadies vs dollar, vulnerable to growth worries
(Reuters) - Sterling edged up against the dollar on Friday but held within sight of a two-month low and looked vulnerable to further losses on speculation over more monetary easing by the Bank of England.
The pound rose 0.1 percent to $1.5881, trading near a two-month low of $1.5828 hit on Thursday when a surprise slide in October retail sales stoked pessimism about the UK economy.
Sterling has been under pressure for much of the week after a gloomy BoE inflation report on Wednesday, in which governor Mervyn King flagged the recent gains in the currency as an impediment to an economic recovery.
With no UK data scheduled for release on Friday, strategists said sentiment towards sterling would continue to be dominated by concerns about the weak outlook.
"The market is getting nervous now of complaints about sterling's strength from the Bank of England," said John Hardy, currency strategist at Saxo Bank, adding that would weigh on the pound.
Hardy said he expected the Bank to restart its asset purchase programme to help stimulate growth, although such a move may not come for several months.
Some analysts expect monetary policymakers may hold fire in the near term after the inflation forecast was revised higher. But the UK growth looked likely to be weak, with the economy expected to expand only slightly more than 1 percent next year.
Trade weighted sterling rose to 83.7 after it hit three-week low of 83.4 on Thursday.
The euro fell 0.4 percent against the pound to 80.22 pence, pulling back from the previous day's two-week high of 80.65 pence. Market players cited demand for sterling from a UK clearer.
Saxo's Hardy said the euro could target its November 8 low of 79.605 pence, given concerns about the euro zone sliding into recession and uncertainty about financial aid to Greece.
But other analysts said sterling gains could be limited by the UK's weak economic outlook.
"The public and household sectors continue to deleverage, and productivity remains low - making the UK a less-than-favourable destination for investment. This does not bode well for the sterling outlook," said Morgan Stanley strategists in a note.
