Sterling regains ground vs dollar, but lags against euro

By Jessica Mortimer

LONDON (BestGrowthStock) – Sterling pared losses against the dollar on Monday, as a sell-off in the U.S. currency gathered pace on worries about U.S. public finances and after Moody’s flagged concerns about the country’s credit ratings.

Earlier the pound was weighed down by a weak UK housing sector survey and comments from a Bank of England policymaker who suggested more monetary easing was possible if the euro zone’s struggles worsened.

Sterling was up 0.32 percent at $1.5869, having risen to as high as $1.5876, its highest since November 23. It went past its 55-day moving average of 1.5873 with some chartists saying a close above that level could be positive for the pound in the short term.

“It is a dollar story that is pushing up sterling,” said Ashraf Laidi, chief markets analyst, at CMC Markets. “The Moody’s story has led to a sell-off in the dollar, but the pound is still losing ground against all the other currencies.”

The dollar index (Read more about the global trade. ) (.DXY: ) was down nearly 0.9 percent as better risk appetite saw investors move away from safe-haven currencies and after Moody’s warned that it could move a step closer to cutting the U.S. triple-A rating.

The euro was up nearly 0.9 percent against the pound, having risen to as high as at 84.55 pence, its highest since Dec 7. It is likely to some resistance near its 100-day moving average around 84.75 pence, some traders said.

Traders noted steady purchases of the single currency by a U.S. name reportedly linked to M&A flows which helped the euro against the pound.


Also weighing down on the pound were worries about the fragility of the housing sector in the UK.

Property website Rightmove said asking prices for homes in England and Wales fell 3.0 percent in the past month, citing economic uncertainty and low mortgage approvals and forecasting bigger falls in 2011.

“The Rightmove is certainly not helping. We have the RICS housing survey coming up (on Tuesday) and if that replicates Rightmove it is likely to put sterling under more pressure,” said Ian Stannard, currency strategist at BNP Paribas.

The pound also came under pressure after Bank of England Deputy Governor Charles Bean said the bank may restart its program to pump money into the economy if growth slows or the euro zone debt crisis has a big impact on Britain’s economy.

The latest FX positioning data showed speculators trimmed bets against the dollar in the latest week and more than doubled net short positions in sterling, in line with increased bets against the euro. (IMM/FX: )

Trade in the euro will also be influenced by developments surrounding a summit of European Union leaders later this week.

The pound showed little reaction to higher-than-expected UK input prices ahead of a key week for UK data, with inflation, labor market figures and retail sales all due.

UK data has been mixed recently, showing high inflation and improvements in the manufacturing sector alongside weak lending and housing market data.

(additional reporting by Anirban Nag; editing by Ron Askew)

Sterling regains ground vs dollar, but lags against euro