RTRS: Pound at 3-week lows as worries about slowdown mount
(Reuters) - Sterling extended losses against the dollar on Friday, as investors sought refuge in safe-haven currencies like the yen and the Swiss Franc on growing concerns about a stuttering global recovery.
The skittish sentiment kept the pound under pressure with many expecting Britain itself to grapple with a faltering recovery in coming months. The pound was boosted by strong retail sales numbers on Thursday, but other indicators like business and mortgage lending showed weakness.
By 11:50 a.m., sterling was down 0.7 percent on the day at $1.5485, having dropped to as low as $1.5464 which was its lowest since July 27. The latest sell-off saw it fall past support around its 200-day moving average at $1.5483.
The pound had rallied to above the $1.57 level earlier this week after Bank of England minutes dashed market speculation of a tilt towards further monetary easing.
But traders said the pound's inability to break through resistance at $1.5716, the intra-day high hit on Aug 8, during the week, despite a string of good news meant the currency could head lower.
"If the worries that the U.S. economy will fall over and concerns about a global slowdown gather ground, it will be pretty negative for the UK and the pound," said Paul Robson, currency strategist at RBS.
"Also, the overnight price action suggests that the environment towards risk is pretty negative and sterling will face some pressure because of that."
Fresh worries about the U.S. economy gathered ground after numbers on Thursday showed new U.S. jobless claims marked a nine-month high last week, while the Mid-Atlantic manufacturing shrank in August for the first time in more than a year.
The data led investors to pare positions in stocks, commodities and growth-related currencies with funds moving to safe-haven assets like government bonds. European stocks fell in on Friday while German Bunds and U.S. Treasuries rallied.
The pound reversed earlier losses against the euro. The single currency was sold off after European Central Bank Governing Council member Axel Weber said the central bank was likely to extend unlimited liquidity to banks past the end of the year.
The euro was down 0.3 percent at 81.95 pence, not far from a low of 81.68 pence hit on August 13, its lowest level since early July. The euro fell to a five-week low, while it struck a 7-week low against the yen.
Kenneth Broux, markets strategist at Lloyds TSB Financial Markets, said the euro and the pound were likely to stay in a range until the first week of September when the market gets U.S. jobs numbers.
"Until then, we will have the market getting used to idea of a slowing U.S. economy which will at some point start hurting the U.S. dollar also," he said.
