Sterling hits 1-mth high vs dollar, caution on UK outlook

Tue Dec 4, 2012 9:06pm IST

* Sterling rises past stops to hit one-month high vs dollar

* Long positions could be threatened by soft UK data

* Real money investors cited as buyers of sterling

By Philip Baillie

LONDON, Dec 4 (Reuters) - Sterling struck a one-month high against a broadly weaker dollar on Tuesday as reported buying by long-term investors outweighed a weaker-than-forecast survey of British construction activity.

The construction PMI showed activity shrank slightly in November and that confidence about the next 12 months fell to its lowest in almost four years.

The figures were a blow to the government the day before finance minister George Osborne's mid-year budget statement.

But the pound showed little reaction and later hit a one-month high of $1.6131, its highest level since Nov. 2, after triggering stop-loss buy orders just above $1.6120.

Sterling was last trading up 0.15 percent on the day at $1.6110, with options barriers reported at $1.6150.

"Sterling looks fully valued up at these levels unless we see further topside impetus given by the services PMI on Wednesday," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

"Sterling is holding up but I would not want to chase it much higher. We had been seeing risk sentiment better in the morning that might have helped sterling/dollar."

A Reuters poll forecast a services PMI reading of 51.1 for November, which would be a slight pick-up in growth compared with 50.6 the previous month and could lift sterling.

"If we get another surprise in the PMI data then we would expect sterling/dollar to move higher," said Kathleen Brooks, research director at

"As long as the environment remains stable and positive for risk assets we could target the $1.63 September highs," she added, referring to the one-month outlook for sterling.

Earlier on Tuesday, data showed British retail sales edged up in November, though by less than analysts were expecting.


Investors will also focus on what Osborne will say in his "autumn statement" in parliament on Wednesday. There is speculation that he is likely to miss his debt and growth targets, raising risks to Britain's triple-A credit rating.

"We tend to be seeing more of the same from Osborne, it is probably going to increase speculation around the AAA credit rating," said Richard Driver, analyst at Canton FX.

"Growth is going to be poor in the fourth quarter which is bringing the rating agencies into play. More of the same is not necessarily good for sterling."

The pound fell against the euro, which was up 0.2 percent at 81.25 pence, not far from the five-week high of 81.325 pence it posted last week.

The euro gained broad support on expectations a Greek debt buyback deal, announced on Monday, will be implemented smoothly although rises against the pound were expected to be limited.'s Brooks said any euro gains were likely to be limited around the 81.65 pence October high ahead of a European Central Bank meeting on Thursday, given the risk policymakers may revise down euro zone growth forecasts.

The Bank of England's Monetary Policy Committee meets on the same day and is widely expected to keep asset purchases unchanged at 375 billion pounds and rates on hold at a record low of 0.5 percent.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 


Wilful Negligence?

Wilful Negligence?

SEBI piles pressure on Sahara to sell overseas hotels  Full Article 

Indian Economy

Indian Economy

India's fiscal deficit in H1 almost 83 pct of full-year target.  Full Article 

M&M Earnings

M&M Earnings

M&M Q2 net profit down 4 percent, hit by poor monsoon.  Full Article 

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 



Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage