ET:Sterling rises against weaker dollar but gains seen limited
LONDON: Sterling rose to its highest in more than a week against a broadly weaker dollar on Thursday but its gains were limited because of uncertainty over the outlook for UK monetary policy.
The pound, which was also helped by month-end position adjustment, was up 0.3 percent at $1.5176, having hit a peak of $1.5187, its strongest since May 22.
Weak equity markets caused the dollar to fall sharply against the yen and pushed the U.S. currency lower across the board, including against sterling, as investors took profit on their previous long dollar positions.
But sterling faced chart resistance at the April 23 low of $1.5196. Analysts said its rise would be capped due to concerns incoming Bank of England governor Mark Carney, who begins his post in July, may favour easing measures to boost the economy.
"Month-end positioning and general volatility in the market is offering sterling some support. But it's difficult to anticipate much in the way of gains for sterling," said Nawaz Ali, market analyst at Western Union Business Solutions.
"Markets don't know what Carney will do. If you look at how much a change in leadership has affected policy at the Bank of Japan and the European Central Bank it could be a painful month for sterling," he said.
Societe Generale analysts forecast the pound to fall to $1.40 by year-end on expectations the BoE would ease monetary policy while the U.S. Federal Reserve scaled back stimulus.
"A lower inflation profile provides greater scope for the BoE to act more to support the still-tentative economic recovery," they said.
The pound stayed weak against the euro, which was steady at 85.51 pence as it continued to hover close to last week's high of 85.97 pence, its strongest since mid-April.
A Nationwide survey showing British house prices rose at their fastest annual rate since November 2011 this month had little impact on the pound.
UK economic data recently has been mixed, with housing data improving but retail sales falling. The next key UK data will not come until purchasing managers' surveys are released next week, which will give details on UK private sector activity in May.
