RTRS:Sterling holds near six-week high vs. dollar after Fed eases
(Reuters) - Sterling traded within sight of a six-week high against the dollar on Thursday after the U.S. Federal Reserve announced a new round of monetary stimulus.
Some strategists said sterling could strengthen against the dollar in coming weeks if Bank of England policymakers hold off signalling further easing in Britain.
Sterling dipped 0.1 percent to $1.6126, off a six-week high of $1.6173 hit on Wednesday after the Fed said it would bolster its quantitative easing programme by $45 billion a month, on top of $40 billion the Fed is already buying in mortgage-backed securities.
It was in line with expectations, although policymakers surprised markets by explicitly linking its policy path to unemployment and inflation.
"Buying $85 billion of assets ... is definitely more aggressive than QE2," said Chris Turner, head of FX strategy at ING, referring to the Fed's previous bond-buying scheme.
"It depends on how the Bank of England reacts but in the interim the pressure is for the dollar to weaken and sterling/dollar to push up to $1.63 by the end of December."
The Fed's widely expected decision to buy Treasuries weakened the dollar against the euro late on Wednesday, which also saw sterling fall against the shared currency.
The euro was last up 0.2 percent at 81.10 pence, holding within the range roughly between 81.65 and 79.60 pence that is has traded in since October.
Analysts said the euro could also gain some support after the European Union agreed to make the European Central Bank the bloc's banking supervisor.
Market players will focus on CBI orders data for December due at 1100 GMT, forecast to pick up from the previous month, and finance minister George Osborne giving evidence to a parliamentary committee on his mid-year budget statement later in the session.
Osborne downgraded growth forecasts and said the country will miss debt-cutting goals in his Autumn Statement last week, raising concerns the UK will lose its prized AAA credit rating.
"Today's CBI orders numbers are unlikely to significantly influence sterling, with potentially more interest in Osborne's testimony on the Autumn Statement," said Lloyds analysts in a note.
Further gloomy news on the UK economy could put the pound under broad pressure.
