RTRS:Sterling hits two-week high against dollar, tracks rising euro
(Reuters) - Sterling hit a two-week high against the dollar on Thursday, tracking a rise in the euro after business activity surveys proved less dire than some had feared and on expectations a deal on Greece would be agreed.
The pound rose to $1.5978, its strongest level since November 9, before paring gains to last trade flat at $1.5951, with traders citing Middle East accounts selling the currency.
Comments reported by Dow Jones from Bank of England policymaker Martin Weale that there was a significant risk of a contraction in the UK in the fourth quarter also knocked sentiment towards the pound a little.
Traders and analysts said the pound could face stiff resistance ahead of the $1.60 level, though it remained comfortably above the mid-November low of $1.5828.
It was lifted earlier by data out of the euro zone which showed manufacturing activity contracting less than expected and as investors grew more optimistic that international lenders would eventually agree on funding for Greece after they failed to reach a deal earlier this week.
"Sterling is very much a slave to moves in euro/dollar. Data out of Europe is showing some impact on euro/dollar moves which sterling is tracking," said Lee McDarby, head of dealing for corporate and institutional treasury at Investec.
"The $1.60 level is back in sight," he said, but added there was chart resistance around $1.5990.
The euro was up 0.2 percent against the pound at 80.61 pence, recovering from a one-week low of 80.07 pence hit on Wednesday.
However, the euro zone data still painted a grim picture of its economic outlook and some strategists said the sterling could gain in the short-term against the euro if the situation in the currency bloc took a turn for the worse.
That could see traders pull money out of the euro and into the pound. Investors seeking safety from the euro zone debt crisis have been buying UK gilts, giving a boost to sterling.
The pound got a small boost on Wednesday after the BoE minutes showed only one policymaker voted for more quantitative easing at the BoE's meeting this month.
The CBI's industrial trends survey for the UK, due at 11.00 a.m. British time, could weigh on sterling if it comes in below forecasts and fuels fears that a recent timid economic recovery may not last.
