Sterling near 2-1/2 mth high versus dlr before CPI data

Tue Dec 18, 2012 2:34pm IST

* Sterling touches $1.6218 in Asian trade, high since Oct. 5

* UK CPI data due at 0930 GMT

* Firmer-than-expected number could lift sterling

* Traders cite year-end demand to buy pounds

LONDON, Dec 18 (Reuters) - Sterling hovered close to a two-and-a-half month high against the dollar on Tuesday ahead of inflation data that may add to expectations the Bank of England will hold off from more easing for now.

Traders said sterling was also lifted in thin trade by end-of-year demand to buy the currency from companies looking to hedge and from central banks.

The pound was up 0.3 percent at $1.6210, having touched $1.6218 in Asian trade, matching a high hit on Oct. 5. More gains could take it towards the September peak of $1.6310.

UK inflation data at 0930 GMT is expected to show annual growth in the UK consumer price index dipping to 2.6 percent from 2.7 percent, though some analysts warned there was a risk of a higher number.

Slightly stronger UK inflation data may add to expectations that the BoE will not opt for more quantitative easing for the time being, which could lift the pound.

Analysts at ING forecast the annual CPI growth rate to rise to 2.8 percent, which they said could see the pound "test trend channel resistance at $1.6250".

Sterling was also helped against the dollar after last week's monetary easing in the United States and by uncertainty over whether U.S. politicians will reach a deal to avoid the "fiscal cliff" of steep tax hikes and spending cuts.

But analysts and traders said volumes were very thin, which could lead to exaggerated moves.

"Sterling's rise is mainly related to the dollar's decline coming into the end of the year," said Glenn Uniacke, a dealer at Moneycorp.

The euro was down 0.2 percent at 81.18 pence, off Monday's near two-month high of 81.55 pence.

Investors will look to Bank of England policy meeting minutes on Wednesday and retail sales data on Thursday for clues on the chances of UK policymakers authorising more bond buying.

Quantitative easing is usually negative for a currency as it increases its supply. (Editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)

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 

REUTERS SHOWCASE

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 

Commodities

Commodities

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