ET:Pound near 4-month high versus dollar as c.bank seen sidelined
LONDON: Sterling hit a four-month high against a weaker U.S. dollar on Thursday as investors grew more confident of Britain's economic recovery and trimmed expectations of more monetary stimulus.
The pound hit a high of $1.5703 - its highest since Feb. 11 - and was just around its 200-day moving average. It was last trading at $1.5665 with traders citing option expiries and offers to sell the pound at $1.5700. This is expected to keep the pair pinned around that level.
Against the euro, sterling was lower. The euro was up 0.3 percent at 85.25 pence, having hit a three-week low of 84.64 pence on Wednesday when better-than-forecast jobs data in the UK lifted the pound broadly.
"Better-than-expected UK data has been helping sterling/dollar and the unwinding of expectations that incoming Governor Carney will be dovish," said Daragh Maher, strategist at HSBC.
Mark Carney takes over as Bank of England chief in July and is expected to keep monetary policy accommodative until Britain achieves sustainable growth. But expectations that he will immediately ease policy aggressively to stimulate the economy have faded in recent weeks, giving sterling a boost.
"The underlying conditions, however, remain challenging with very little growth and fiscal austerity. The sell-off that we saw earlier in the year could return," Maher added.
Sterling has recovered from a 2-1/2 year low of $1.4832 struck in March after Britain avoided a "triple-dip" recession in the first quarter and recent data has pointed to some modest growth in the second quarter. But the UK economy is expected to underperform the United States, given that the euro zone, which is Britain's biggest trading partner, is mired in recession.
"We look to reinitiate short positions at higher levels as we believe the fundamental and technical picture is still negative," Morgan Stanley said in a morning note.
Another reason sterling is rising is that speculators are cutting hefty bets on gains in the dollar which they had made earlier when they expected the Federal Reserve would soon reduce monetary easing. Recent soft U.S. data has led to some uncertainty whether the Fed will withdraw stimulus this year.
