RTRS:Sterling lifted versus dollar by U.S. fiscal cliff optimism
(Reuters) - Sterling edged up against the dollar on Monday as rising optimism of a resolution to the U.S. fiscal cliff helped lift perceived riskier currencies, including the pound.
The leaders of the U.S. Senate and House said on Friday they would be flexible in efforts to settle fiscal policy differences and avert a $600 billion "fiscal cliff" of tax rises and spending cuts due to come in early next year.
Signs that politicians were willing to compromise soothed concerns that the U.S. economy could be pushed into recession if the tax rises and spending cuts go ahead.
"That is probably dollar negative," said Adam Cole, global head of FX strategy at RBC, adding a swift resolution could encourage more investors to cut positions in the safe haven dollar.
Sterling rose 0.1 percent to $1.5899, breaking clear of a two-month low of $1.5828 hit last week.
With no UK data scheduled for Monday the main focus this week will be the release on Wednesday of minutes from the Bank of England's November meeting. Investors will be scrutinising the minutes to try and gauge the likelihood of further monetary easing.
"The Bank of England's minutes will show the hurdle for more quantitative easing is quite high. If anything (the minutes) will be sterling positive," said RBC's Cole.
Many market players expect the minutes to show an almost unanimous vote against more easing in November, but could look for clues of how policymakers view the government's recent decision to transfer the interest proceeds of QE from the BoE to the UK treasury.
The euro was up 0.15 percent at 80.30 pence, helped by optimism that international lenders will forge a deal to release debt-stricken Greece's next aid tranche.
Traders cited options expiries at 80.10 pence, which would keep the single currency close to that level, with potential resistance at the 21-day moving average at 80.36.
Some strategists warned the outlook for the pound was clouded by the risk of deteriorating economic data. The UK economy emerged from recession in the third quarter but recent data has been weak.
"Big picture, we still think sterling looks a little expensive here against both the euro and the dollar relative to UK fundamentals, which have been far from impressive since the Q3 GDP data," Lloyds analysts said in a note.
