ET:Sterling falls versus dollar, further losses likely
LONDON: Sterling fell against the dollar on Friday in volatile month-end trading and analysts said it would stay under pressure on prospects of further monetary easing by the Bank of England.
The British currency saw some support after overnight data showed consumer morale rose to a six-month high but selling quickly erased gains. The British Chambers of Commerce revised up its economic growth forecasts, but this, too, failed to inspire lasting gains.
Analysts cautioned gains in the currency would be fleeting as sellers emerged at higher levels and on concerns incoming BoE governor Mark Carney could favour more monetary stimulus after he takes up the post in July.
Sterling was down 0.2 percent on the day against the dollar at $1.5195, retreating from an earlier high of $1.5240, its strongest since May 21.
A reported option expiry at $1.5100 could keep the currency close to that level.
Strategists said sterling moves on Friday would be dictated by position squaring on the last day of the month. In coming days the pound would trade less on UK specific data and more on what is happening in the dollar.
"Sterling is caught in the backdraft of what is happening in other currencies versus the dollar... it will likely be the victim of a stronger dollar and could break below $1.50 in the early part of next month," said Simon Smith, chief economist at FXPRO.
The euro was up 0.1 percent against sterling at 85.70 pence, not far from Thursday's peak of 85.985 pence, which was its strongest since April 17.
Traders said month-end demand for euro/sterling by central banks in Europe could keep the pair well supported.
Talk that the U.S. Federal Reserve is poised to pare back its stimulus programme in coming months saw a setback after weaker-than-expected U.S. data fuelled doubts about the economy's recovery.
But analysts said the pound was still likely to trade lower against the dollar in coming months due to Carney's potentially aggressive easing stance.
"Our analysis finds that sterling is currently diverging from positive (UK) economic news, with the prospect of further monetary easing once Carney takes over at the BoE likely to keep sterling under pressure," analysts at Morgan Stanley said in a note.
