ET:Sterling pulls away from 10-month high versus euro
LONDON: Sterling dipped against the euro on Monday, pulling away from a 10-month high, as investors kept to the sidelines before this week's Bank of England quarterly inflation report and jobs data.
Traders and analysts said the pound faced stiff chart resistance at 1.20 euros, which equates to 83.33 pence per euro and marks a level at which importers often look to sell the British currency.
The euro was last up 0.15 percent at 83.56 pence, above a low of 83.00 pence reached late last week that was its weakest since mid-January.
But the pound could get a boost on Wednesday if the BoE raises its growth and unemployment forecasts and brings forward the market expectations for when interest rates will rise. Strong UK jobs data on Wednesday would also lift the pound.
This would emphasise the difference between the monetary policy outlooks in Britain and the euro zone. The European Central Bank last week cut euro zone borrowing costs to 0.25 percent, below Britain's 0.5 percent.
"I'd expect a stronger pound going into the Bank of England Inflation Report on Wednesday," said Nawaz Ali, market analyst at Western Union Business Solutions, though he said he expected gains to be limited as sterling was already fairly strong.
"There will be a lot of resistance around 83.20 pence (per euro) and it will be difficult to get above there." He expected the pound to trade in a $1.59-$1.61 range against the dollar.
Sterling was steady against the dollar at $1.6011, keeping away from a low of $1.5904 reached early last week.
But analysts said its gains may be limited after strong U.S. jobs data on Friday increased the chances of the Federal Reserve scaling back stimulus in the coming months, boosting the dollar.
"Faced with mounting evidence of firming growth, the BoE will likely have to revise its assumptions upwards," Mitul Kotecha, global head of foreign exchange strategy at Credit Agricole, said in a note to clients.
"Consequently this bodes well for sterling, and while gains against the dollar are likely to be limited, euro/sterling is set for a further downward correction, with a break (though) 83.00 on the cards shortly."
