RTRS:Sterling slips from two-year highs versus dollar, lags euro
(Reuters) - Sterling fell against the dollar for the first time this week on Wednesday, as investors and speculators trimmed bets in favour of the currency while they await more evidence of a durable recovery in the UK economy.
The pound slipped from a two-year high against the dollar scaled on Tuesday after upbeat comments from Bank of England chief Mark Carney and strong house prices. British gilt yields also fell on Wednesday, erasing some of the yield differentials in favour of the pound and pulling down the currency.
The pound was down 0.2 percent at $1.6405, off a two-year high of $1.6468 struck on Tuesday. Despite the latest losses, the pound is still up for the month and nearly 5 percent higher in the past six months.
It underperformed the euro which extended gains into a second straight day. The euro rose 0.2 percent against the pound to 83.85 pence, boosted by tight liquidity in the euro zone and European banks repatriating funds to shore up their capital bases for an ECB asset quality review.
The European Central Bank's reluctance to ease policy to beat disinflation has also helped the euro.
"In the near term, the momentum does look a bit weak for sterling and in favour of the euro given the less dovish stance of the ECB," said Yujiro Gato, currency strategist at Nomura.
"But in the medium term we are bullish sterling over euro given the different economic outlooks for the euro zone and the UK. To us, sterling will still be the best-performing European currency."
Recent data out of the UK showed slightly stronger than forecast industrial output data while the National Institute of Economic and Social Research said on Tuesday that growth was picking up. The economy grew an estimated 0.8 percent in the three months to the end of November, up from 0.7 percent in the three months to October.
Bank of England Monetary Policy Committee member Martin Weale will speak at the National Institute of Economic and Social Research later in the day and may shed light on monetary policy and the bank's forward guidance.
